Hawaii bar journal april 2016

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Access to the Sun Emerging Community Renewables Program

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ARTICLES 44

Access to the Sun: Envisioning the Policy Framework for Hawaii’s Emerging Community Renewables Program

by Melissa Miyashiro

19 18

From One Paradise to Another: A Cross-Cultural Conversation on Traveling from Suzhou to Hawaii

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by Mark T. Shklov and Nathan C. Yang, with Xinhua Di

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Gifts from Clients: Yes or No

by Lennes N. Omuro

HSBA OFFICERS President Jodi Kimura Yi

OF NOTE

President-Elect Nadine Ando Vice President Howard Luke Secretary Russ Awakuni

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Court Briefs

Treasurer Mark M. Murakami

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Case Notes

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Notice for Reappointment of Incumbent Magistrate Judge Kevin S.C. Chang

YLD OFFICERS President Ryan Hew Vice President/President-Elect Trejur Bordenave Secretary Catherine Taschner Treasurer Ryan Loeffers

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HSBA Happenings

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On the cover: Life is a Tangle By Patrice A Federspiel. Born in a small Wisconsin town, Patrice moved to Hawai`i in the year 2000 to follow her dream of being a full time, professional artist.Today Patrice paints, teaches, and markets her art full-time. She teaches watercolor classes at the Honolulu Museum of Art, privately, and in workshops across the country. Patrice holds a BS in Art Education from the University of Wisconsin – Madison. She is a signature member, trustee, and past president of the Hawai’i Watercolor Society. Her art has been in numerous exhibits in the U.S., earned many awards, and is collected by fans worldwide. See more of her art at: www.ArtOfAloha.com Notices and articles should be sent to Edward C. Kemper at edracers@aol.com, Cynthia M. Johiro at cynthia.m.johiro@hawaii.gov, or Carol K. Muranaka at carol.k.muranaka@gmail.com. All submitted articles should be of significance to and of interest or concern to members of the Hawaii legal community. The Hawaii Bar Journal reserves the right to edit or not publish submitted material. Statements or expressions of opinion appearing herein are those of the authors and not necessarily the views of the publisher, editorial staff, or officials of the Hawaii State Bar Association. Publication of advertising herein does not imply endorsement of any product, service, or opinion advertised. The HSBA and the publisher disclaim any liability arising from reliance upon information contained herein. This publication is designed to provide general information only, with regard to the subject matter covered. It is not a substitute for legal, accounting, or other professional services or advice. This publication is intended for educational and informational purposes only. Nothing contained in this publication is to be considered as the rendering of legal advice.

Access to the Sun: Envisioning the Policy Framework for Hawaii’s Emerging Community Renewables Program

by Melissa Miyashiro The growth of Hawaii’s solar power market is one of the state’s best clean energy success stories. As of January 2016, the Hawaiian Electric Companies had installed more than 77,000 solar photovoltaic systems across the state, accounting for 17 percent of all customers.1 Yet, while many homeowners have been able to use solar power to break free from the volatile energy costs of fossil fuels, many other Hawaii residents are currently unable to directly participate in renewable energy because of their location, building type, access to the electric utility grid, or other impediments. Roughly half of Hawaii households cannot access solar power because they are renters, live in a condominium, or live on a “saturated” circuit where 4 April 2016

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new solar installations are being delayed or banned.

After years of legislative attempts, Hawaii passed Act 100 in 2015, to help balance this inequity. Act 100 laid the foundation for a “community-based” renewable energy program in Hawaii by directing electric utilities to file a community-based renewable energy tariff with the Public Utilities Commission (“PUC”).2 Act 100, 27th Leg., Reg. Sess.

(2015). The language in the Act sets a bold vision for community renewables, calling for “dramatically expanding the market for eligible renewable energy resources to include residential and busi-

ness renters, occupants of residential and commercial buildings with shaded or improperly oriented roofs, and other groups who are unable to access the benefits of onsite clean energy generation.” Id. § 1 (emphasis added).

The legislature further found that “it is in the public interest to promote broader participation in self-generation by Hawaii residents and businesses through the development of community-based renewable energy facilities in which participants are entitled to generate electricity and receive credit for that electricity on their utility bills.” Id. (emphasis added).

The PUC took that bold mandate to heart and responded to the Hawaiian Electric Companies’ proposed tariffs by opening an investigative docket to determine whether the proposed tariffs com-

ply with the mandates of Act 100.3 See In re Application of Hawaiian Electric et al., Docket No. 2015-0389, Order No. 53358 Suspending Transmittal No. 1509, filed November 27, 2015. As evidenced by the PUC’s active oversight in this and other matters that are fueling Hawaii’s transition to renewable energy, there will continue to be a critical role for law and policy in shaping that transition.

A Menu of Options: What Can Community Solar Look Like?

The concept of “communitybased” renewables is similar to the concept of a community garden and has gained traction nationwide.4 Depending on the structure of the program, any individual or entity can buy or lease solar panels, even if they do not own or have access to a rooftop. Flexibility is one of the inherent strengths of the concept. Although often coined “community solar,” the program concept is not limited to just solar power. For example, the community-based WindShare project embedded a medium-scale wind turbine in Toronto, Canada in 2003.5 Billed as the world’s first urban wind turbine, it sits in the heart of Toronto, has the capacity to generate more than a million kilowatt-hours each year, and is open to students for educational field trips.6 The project is owned by a renewable energy cooperative and received initial funding from 427 community members.7 In part because of the novelty of the concept, policymakers and advocates are equipped to shape a community renewables program that is tailored to address specific community needs and removes barriers—like cumbersome and mismatched registration requirements under federal and state securities laws— that would hinder the dramatic expansion envisioned by the legislature in Act 100. Indeed, Act 100 explicitly found that “a community-based renewable energy tariff should, to the extent possible, be designed in an open and accessible process and should accommodate a variety of community-based renewable energy projects, models, and sizes.” Act 100 § 1. This flexibility is evident in the various shapes that the concept can take,

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including the policy framework examples that follow.

Virtual Net Energy Metering If a primary goal of a community power program is to broaden participation in renewable energy, then the proven net energy metering (“NEM”) concept is an obvious starting point.

NEM programs allow utility customers to generate energy at their home or business and pay their monthly electric bill based on the “net” energy consumed. In other words, the monthly electric bill is generally based on the number of kilowatt-hours consumed, minus the number of kilowatt-hours generated. The simplicity and cost-effectiveness of this model has enabled the NEM concept to take off around the country.

For all its successes, a drawback of the NEM concept is that not all community members can generate energy at their home or business. This limitation has primarily taken the form of limited roof space to install solar panels. By “dramatically expanding” the market to renters and other groups that are currently unable to access onsite renewable energy generation, Act 100 is specifically targeted at this inequity. See Act 100 § 1.

The most direct path to addressing this inequity is to open the NEM program structure to consumers who generate energy at a location other than their residence or business. Under this “community net energy metering” concept, subscribers in a community-based energy project would receive electric bill credits, in proportion to their pro rata subscription interest in the project and the generation output of the project.

As of October 2015, similar concepts were in place in a number of other states under various labels such as community solar gardens, virtual net metering, and neighborhood net metering: California, Colorado, Connecticut, Delaware, D.C., Illinois, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Pennsylvania, Rhode Island, Vermont, and Wisconsin. See Institute for Local Self-Reliance, Updated: States Supporting Virtual Net Metering, 6 April 2016

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http://ilsr.org/virtual-net-metering/ (last visited Feb. 24, 2016).

In some of these states, virtual NEM is open to all or nearly all customers (e.g., in D.C., Maine, New Pennsylvania, and Hampshire, Vermont). Id. In other formulations, it is open only to limited sectors (e.g., California for multi-tenant properties and local governments only; Maryland for agricultural, nonprofit, and local governments only). Id. New York has adopted a hybrid approach, with “community distributed generation” set to utilize a virtual NEM-like customer bill credit, but with interconnection priority given to projects that are deemed “innovative” because they (i) are “at sites where they will bolster grid reliability or provide other locational benefits” or (ii) “promote low-income customer participation” by ensuring that at least 20 percent of project participants are lowincome utility customers.8 Even where the concept of subscriber bill credits is set by a virtual NEM program or similar policy, community-based power can encompass numerous other variations. For example, Minnesota’s legislation constrains virtual NEM (and traditional NEM) projects to a capacity limit of one megawatt. Minn. Stat. §§ 216B.1641, 216B.164 subd. 3(a). Maine set a much larger project capacity limit for virtual NEM projects, at ten megawatts. Me. Rev. Stat. tit. 35-A, § 3603(2)(a).

Colorado’s approach to community-based power includes a geographic limitation, generally requiring a project to be located within the same county as subscribers or an adjacent county. Colo.

Rev. Stat. § 40-2-127(2)(B)(II).

Massachusetts’ neighborhood net metering legislation requires that a project and its subscribers must be located in the same “neighborhood.” The law defines neighborhood as “a geographic area including and limited to a unique community of interests that is recognized as such by residents of such area” and defers to the department of public utilities to further refine this geographic limitation. Mass. Gen. Laws ch. 164, §§ 164-138, -140.

Such variations are nearly endless and can include specifications such as: • a minimum and maximum number of subscribers in a project; • a minimum and maximum size of each individual subscription; • a maximum percentage of the capacity of that project that can be devoted to any one subscriber; • who may own or operate a project; which utilities must offer communitybased power programs; and • an aggregate capacity limit for all power projects in a given program.

Together, the resulting menu of options allows tailoring of community-based power programs, adjusting the virtual NEM concept to fit local conditions.

“Value of Solar” and Other Ways of Valuing Community Renewables Much like the traditional NEM concept is expected to undertake a transition toward market-based valuations of energy exported from rooftops to the energy grid, one variation of the virtual NEM concept involves subscriber bill credits that are based on factors other than the subscriber’s interest in a power-generating facility.

Hawaii’s 2015 community-based renewable energy legislation (Act 100) favored this approach. Under Act 100, subscriber bill credits are to “compensate those customers for the electricity and electric grid services provided to the electric utility” and “provide fair compensation for electricity, electric grid services, and other benefits provided to or by the electric utility, participating ratepayers, and non-participating ratepayers.” Haw. Rev. Stat. § 26927.4(c)(2)-(3). Unfortunately, this forward-looking approach may have ultimately delayed implementation of community-based renewable energy in Hawaii. The resulting utility proposals affixed a specific (low) value to energy generated by the projects, and attempted to account for this by unrealistically

mandating the (low) price that would be charged by developers to subscribers.9 In contrast, under a more traditional virtual NEM approach, the value of the customer bill credits would be fixed at or nearer the retail rate of electricity, and developers would compete for subscriptions based on the price of participating in a particular project.

Minnesota’s solar gardens legislation contemplated a similar but more gradual transition, starting with subscriber bill credits set at the retail rate of electricity, but evolving to a “value of solar” rate that “compensates customers through a bill credit mechanism for the value to the utility, its customers, and society for operating distributed solar photovoltaic resources interconnected to the utility system and operated by customers primarily for meeting their own energy needs.”

Minn. Stat. §§ 216B.1641(d), 216B.164 subd. 10(a).

This rate “must, at a minimum, account for the value of energy and its delivery, generation capacity, transmission capacity, transmission and distribution line losses, and environmental value.” Id. § 216B.164 subd. 10(f).

One can envision that such an evolution of community-based energy bill credits might improve current valuation methods by capturing dynamic attributes such as the time of energy generation in relation to the time of energy consumption by the subscriber, the location-dependent value of generation in relation to the instantaneous needs of the distribution grid at each place and time, and the technology-dependent ability of a project to provide ancillary resources (such as energy storage) to the grid. The result of this evolution will mean that the value of each subscriber’s participation in a community project, and thus the value of the energy to the entire community, will depend on all sides of the energy equation, i.e. the time and location-dependent balance between energy supply and demand.

Much like traditional rooftop solar NEM, the simplicity of fixed participant bill credits that are tied to kilowatt-hours generated by a project (i.e. virtual NEM) is a positive ingredient for launching this

nascent industry and gaining buy-in from early adopter consumers. Over time, however, a more dynamic link between the grid, participants’ power consumption, and a project’s power output is more likely to provide needed incentives and market mechanisms to enable a growing fleet of communitybased power projects.

Feed-In Tariff and Other Potential Mechanisms The oldest, and perhaps simplest, examples of community-based power projects did not utilize a subscriber bill credit and did not invoke the menu of community-tailoring options described above. Instead, those projects often utilized the concept of a feed-in tariff (“FIT”). In the FIT concept, which is particularly popular outside the United States, a utility compensates numerous energy generators at a standardized rate.10 This enables power generation to be owned by a variety of non-utility parties, typically for small or medium scale projects.

Under a FIT arrangement, energy projects do not need to be tied to a particular community or set of subscribers.

Very often, FIT projects are developed by private entities as for-profit ventures.

Individual utility customers might also participate in a FIT arrangement, installing power-generating equipment and recouping an income stream from the utility at the FIT-prescribed rate.

Nonetheless, communities can also utilize FIT arrangements. For example, Toronto’s WindShare project came online in 2003, long before most community-based renewable energy policies and programs were in place. The project is owned by the Toronto Renewable Energy Cooperative, whose participating members are entitled to a share of a FIT income stream generated by the wind turbine.

This community-based arrangement is not borne from particular legislation or policy. In essentially any location offering a FIT program, it is probably possible to structure a project such that legal or beneficial ownership is held

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by a community-based entity. However, this community-owned FIT concept falls short of virtual NEM and “value of solar” arrangements because it lacks any mechanism to directly tie participants’ energy bills to the output of the community-based energy project, erecting a psychological barrier between energy use and generation.

The FIT concept is also inherently tied to a traditional model of utility-centric power supply, rather than a distributed energy system fostered by other types of community-based power, because the utility procures energy from the project and re-sells that energy to consumers, just as with other power purchase arrangements.

Two other approaches to quasicommunity-based power also share this link to traditional utility operations, and are similarly not creatures of law or policy favoring community-based power. In Florida, a utility is planning to install up to 2.4 megawatts of solar capacity, funded by customers who volunteer to contribute $9 per month on their electric bill.11 Although labeled as a “communi-

ty-based solar partnership,” this concept does not involve shared community ownership of renewable energy generation, and it probably cannot be replicated on a larger scale.

In San Antonio, Texas, a solar development firm has agreed to provide solar power to the local utility, but in a twist, the power will come from panels located on individual roofs in the community.12 The program promotes “free” panels installed on each participant’s roof, in exchange for a three-cent bill credit for each kilowatt-hour generated by those panels. The power will be sold to the utility under an otherwise traditional power purchase agreement based on the aggregate capacity of all the installed panels. This form of community solar does link participants’ bills to the energy generated on their roof, in a small way. It also promotes distributed energy resources, and it is likely to be replicable on a larger scale. However, much like the Florida program, it does not involve shared community ownership of renewable generation.

Impact of Securities Law on Hawaii Program’s Structure As Hawaii contemplates the optimal model for community renewables, an open legal question is whether such projects would be subject to registration requirements under federal and state securities laws. Compliance with costly and time-consuming registration requirements would likely be a barrier to expanding access to the economic, environmental, and social benefits of renewable energy through community solar.

See Samantha Booth, Comment, Here Comes the Sun: How Securities Regulations Cast a Shadow on the Growth of Community Solar in the United States, 61 UCLA L. REV. 760, 780 (2014) (noting that the cost of registering a public offering “runs at least into the hundreds of thousands and can easily exceed $ 1 million”). Thus, careful and early attention to the interplay between the budding program and securities oversight is prudent.

Securities laws serve two primary objectives: (1) to require the disclosure of material information to investors, allowing them to evaluate the merits of a parApril 2016

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ticular investment; and (2) to prevent and enforce against fraud. Id. at 779.

When applied to the community solar concept, this duality forms a natural tension between protecting low and moderate income participants—who are perhaps most vulnerable to fraudulent activity—and expanding access to financing instruments that would allow them to enjoy the many benefits of renewable energy. Id. at 788.

All offers and sales of “securities” must be registered under federal and state law unless an exemption is available. 15 U.S.C. §§ 77d-77g. A “security” is defined broadly in both federal and state securities law. Hawaii’s Uniform Securities Act, for example, defines a “security” to include commonly known investment and trading documents— such as notes, stocks, and bonds—as well as more mutable items like a “certificate of interest or participation in any profitsharing agreement” or an “investment contract.” Haw. Rev. Stat. § 485A-102.13 Although lengthy, these definitions are not exhaustive. When faced with

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novel financial instruments, courts have looked to the framework for analyzing the “investment contract” term within the definition. See S.E.C. v. W. J. Howey Co., 328 U.S. 293, 299 (1946); Kristin Bailey, Note, Insecurity for Community Solar: Three Strategies to Confront an Emerging Tension between Renewable Energy Investment and Federal Securities Law, 10 J. TELECOMM. & HIGH TECH. L. 123, 134 (2012).

In S.E.C. v. W. J. Howey Co., 328 U.S. 293 (1946), the United States Supreme Court set forth the seminal four-part test for analyzing whether a particular financing arrangement is subject to federal securities regulation as an “investment contract.” Under Howey, an “investment contract” is created when a person (1) invests his or her money, (2) in a common enterprise, (3) with an expectation of profits, (4) solely from the efforts of others. Howey, 328 U.S. at 29899. All four factors must be met for an instrument to be an “investment contract.” See id. at 301. The Court in Howey, as reaffirmed in United Foundation,

Inc. v. Forman, 421 U.S. 837, 848 (1975), emphasized that form should be disregarded for substance, and a court’s emphasis should be placed on the economic realities and specific characteristics of a particular transaction. Id. at 298.

Whether an interest in a community solar project falls within the definition of a “security,” and thereby triggering complicated and expensive registration requirements, is a matter of discussion nationwide. As of this writing, the issue remains unsettled. See generally David Feldman et al., Nat’l Renewable Energy Lab., Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation, at 12 (2015) (noting a lack of legal precedent, market research, and data on community solar project successes).14 The Securities and Exchange Commission (“SEC”) has provided some, albeit limited, guidance on the issue. In 2011, the SEC issued a “noaction” letter15 to CommunitySun, LLC, a solar developer that sold interests in community solar installations (called

“SolarCondos”) under an arrangement where a group of customers collectively owns the installation and receives virtual net metering credits on their individual electric utility bills. Id. at 15. The SEC issued a no-action letter in response to CommunitySun’s corresponding request that argued purchasers of SolarCondos had no expectation of profit (negating the third prong of the Howey test) but were instead purchasing a system for generating electricity for their personal use. 16 Relying on CommunitySun’s arguments, the SEC issued the no-action letter on the basis that SolarCondos were not “securities” because “the benefit to an owner will be limited to a reduction of the owner’s total electricity consumption for purposes of calculating the net amount of electricity purchased from the utility.” Id. That interpretation is aligned with what appears to be growing agreement evidenced in a series of national stakeholder meetings and through informal discussions with SEC staff. See Feldman et al., at vii and 13

(highlighting shared solar stakeholder meetings in 2013 and 2014 and discussions with SEC staff in their individual capacities).

Although the no-action letter was limited to the specific facts and circumstances of CommunitySun’s SolarCondos model, this interpretation suggests a likely avenue through which prospective community renewables programs will ensure that they are not viewed as investment securities—i.e. if they are structured with a primary goal and function of personal consumption rather than an expectation of profit. Id. at vii and 15. The compensation structure for a share of electricity and the way the program is marketed will inform this analysis. A customer’s motivation for purchasing an interest in a community solar project is likely no different than that of a traditional NEM customer who wishes to put solar panels on his or her rooftop: the ability to self-generate power for his or her household needs, free from the volatile pricing and/or environmental harm of fossil fuels—not

as a profit-seeking business venture. The inherent flexibility of the community solar concept, as discussed above, allows policymakers to structure a program so that the economic realities of the program fall outside the federal definition of a “security” for any one of the four Howey factors.

The legal analysis under state securities law, however, is more nuanced.

Although a majority of states also follow the Howey test, at least seventeen jurisdictions—including Hawaii—apply a broader “risk capital” test.17 Like in Forman, the Hawaii Supreme Court in State v. Hawaii Market Center, Inc., 485 P.2d 105 (Haw. 1971), noted that determining whether a security exists should focus on the “economic realities of security transactions.” Hawaii Market, 485 P.2d at 109.

Taking the analysis further, the Hawaii Market court chose to adopt a more expansive definition of an “investment contract” holding that the test articulated in Howey “led courts to analyse [sic] investment projects mechanically, based on a narrow concept of investor partici-

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pation” and risked failing to afford the broad protection intended by the statute.

Id. at 108.

The “risk-capital” test provided in Hawaii Market considers an “investment contract” to arise whenever: (1) an offeree provides initial value to an offeror; (2) a portion of this initial value is subjected to the risks of the offeror’s business; (3) providing this initial value is induced by the offeror’s promises or representations, which give rise to a reasonable understanding or expectation that a valuable benefit (exceeding the initial value) will accrue to the offeree as a result of the offeror’s business; and (4) the offeree does not receive the right to exercise practical and actual control over the managerial decisions of the offeror’s business. Id. at 109. Like the Howey test, all four factors of the “risk capital” test must be satisfied for an instrument to be an “investment contract.” See id.

Under the “risk capital” test, the third prong no longer focuses solely on a profit motive. Rather, the purchaser only need expect a “valuable benefit of some kind, over and above the initial value.” Id. This broad determination is made on a case-by-case basis looking at the particular economic relationship between the offeror and the offeree. Id. Indeed, the Hawaii Market court expressly discouraged using a formulaic approach for defining an “investment contract.” Id. at 108.

Naturally, the expansive definition of “investment contract” under the Hawaii Market test offers little clarity on how courts would analyze the “valuable benefit” received by participants in community renewables projects. Looking at the above-mentioned virtual NEM and “value of solar” structures, for example, some stakeholders have questioned whether the credits that customers receive on their electric bills would be construed as a “valuable benefit” should they surpass the initial value. See e.g., Feldman et al., at 20; Booth, 61 UCLA L. REV. at 783. Yet, an interpretation that they are “securities” would defy logic. An interpretation that entering into a solar lease would be providing initial value, for example, would render

almost every contract a potential security, including traditional rooftop solar installations for homeowners. Looking at the economic realities of the most likely community solar arrangements, regulation as a security would be a poor fit. Although the Hawaii Market test sought to capture new instruments that could be used to deceive and defraud unknowing investors, it should not be interpreted so broadly as to encompass financial arrangements that are not interpreted as securities (e.g., rooftop solar sales and leases).

Finally, even if an interest in a community solar project is found to be a “security” under either federal or state law, one or more exemptions may be available to avoid costly and cumbersome registration requirements that could hinder the dramatic expansion of this market, as contemplated in Hawaii’s Act 100. Potential qualifying exemptions that have been identified by stakeholders include: • Rule 506 of Regulation D exemption, which allows unlimited participation of accredited investors and up thirty-five nonaccredited investors so long as certain disclosures are made and non-accredited investors meet certain financial sophistication requirements. But, general solicitation and advertising are not allowed.

Rule 506 is probably not a realistic solution for truly “community-based” projects. The cost and complexity of compliance are likely to be high for a small project, and the number of allowed participants is likely to be too low for a large project.

• Rule 504 small offerings exemption for offerings that do not exceed $1 million within a twelve-month period, although general solicitation and advertising are usually not permitted. Also, unlike Rule 506 exemptions, Rule 504 does not exempt offerings from state securities laws.

• Section 3(a)(11) exemption for intrastate offerings, if securities are offered and sold only to residents of a single state. This exemption avoids federal registration, but state registration may still be

required. To avoid a situation where an offering is exempted under federal law but remains subject to stringent state registration requirements (here as with Rule 506), state legislatures can adopt policies and craft exclusions that explicitly favor community solar within the state securities law framework.

• “Crowdfunding” exemption arising out the Jumpstart Our Business Startups (JOBS) Act passed in 2012, which allows up to $1 million raised per year and general solicitation and advertising to accredited investors. For now, this exemption is directed at true startup investments, and thus is likely to be a poor procedural match for community renewables.

See generally Booth at 788-800; Feldman et al., at 18-19 (summarizing and analyzing securities law exemptions). None of these exemptions are a good fit for community solar, further driving home the point that an interest in a community solar project is probably not a “security” that should be within the purview of securities regulations. Looking at the broader landscape, there are many community solar projects being built and sold in places like Minnesota and Colorado without invoking a “securities” problem. This suggests that the securities discussion may be largely a red herring, and it should not be allowed to grow into a barrier for utilities and developers who wish to expand community access to renewable energy.

Conclusion Thanks to the flexibility of the community renewables concept, policymakers and advocates have an opportunity to pick from a menu of options to craft an optimal, expansive, and legally sound program. Upfront and careful attention to selecting a structure that addresses specific community needs while removing barriers—like cumbersome and illfitting registration requirements under federal and state securities laws—can avoid further hindering the dramatic expansion envisioned by the legislature in Act 100 of 2015. As the Hawaii legislature made clear in Act 100, establish-

ing a community renewables program that dramatically expands access to renewable energy for those that currently cannot enjoy its economic, environmental, and social benefits is in the public interest.

———————— 1 In 2015 alone, 26,000 photovoltaic systems were installed or approved. Duane Shimokawa, Hawaiian Electric has 77,000 installed solar PV systems across Hawaii, PACIFIC BUSINESS NEWS (Jan. 28, 2016).

2 Act 100 directed that utilities file proposed tariffs by October 1, 2015. Haw. Rev. Stat. § 269-27.4(a). The timeline was influenced by the expiration of federal tax credits at the end of 2016. In December 2015, the federal tax credits for renewable energy, including the wind power production tax credit and solar investment tax credits, were extended by five years.

Kathryn Mykleseth, Tax extension for renewables in budget bill, HONOLULU STAR-ADVERTISER (Dec. 18, 2015). This extension buys the state more time to develop an equitable and robust program that fulfills the mandate of Act 100, but Hawaii residents (roughly half) who have waited for community access to renewable energy must continue to wait in the meantime.

3 At the time of this writing, stakeholders were awaiting the PUC’s decision on intervention in the docket.

4 See Institute for Local Self-Reliance, Updated: States Supporting Virtual Net Metering, http://ilsr.org/virtual-net-metering/ (last visited Feb. 24, 2016).

5 See Toronto Renewable Energy Co-Operative, History of TREC, http://www.trec.on.ca/ about/history (last visited Feb. 24, 2016).

6 See TREC Education, Wind Energy Tour, https://treceducation.ca/programs/windenergy-tour/ (last visited Feb. 22, 2016).

7 See WindShare, Making History, http://www.windshare.ca/about/communitywind-power/making-history/(last visited Feb. 22, 2016).

8 In re Policies, Requirements and Conditions for Implementing a Community Net Metering Program, Case No. 15-E-0082, Order Establishing a Community Distributed Generation Program and Making Other Findings 19-22 (N.Y. Pub. Serv. Comm’n, July 7, 2015).

Energy Program, Transmittal No. 15-09 (filed Oct. 1, 2015).

10 See generally, U.S. Energy Info. Admin., Feedin tariff: A policy tool encouraging deployment of renewable electricity technologies, http://www.eia.gov/todayinenergy/detail.cfm? id=11471 (last visited Feb. 22, 2016).

11 Florida Power & Light, https://www.fpl.com /rates/pdf/community-solar-factsheet.pdf (last visited Feb. 22, 2016).

12 CPS Energy, Solar HostSA, http://www. solarhostsa.com/ (last visited Feb. 22, 2016).

13 The federal definitions contained in the Securities Act of 1933 and the Securities and Exchange Act of 1934, as amended, are substantially similar to the Hawaii definition.

Compare Haw. Rev. Stat. § 485A-102, with 15 U.S.C. § 77b(a)(1), and 15 U.S.C. § 78c(1)(10).

14 This document is available online at: http://www.nrel.gov/docs/fy15osti/63892.pdf.

15 An individual or entity who is not certain whether a particular offering would constitute a violation of federal securities law can seek formal assurance about the status of the new offering via an interpretative “no-action” letter prepared by SEC staff. U.S. Sec. & Exch.

Comm’n, No-Action Letters, https://www.sec.gov /answers/noaction.htm (last visited Feb. 24, 2016). Through a no-action letter, SEC staff makes a recommendation not to pursue enforcement for securities violations, but the scope is limited to the requester and the specific facts and circumstances set forth in the request. Id. 16 CommunitySun, SEC No-Action Letter (Aug. 29, 2011), available at https://www.sec. gov/Archives/edgar/vprr/1100/11008130.pdf (enclosing incoming request letter).

17 Jurisdictions that have adopted the “risk capital test” include: Alaska, Arkansas, California, Georgia, Guam, Hawaii, Illinois, Michigan, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Washington, Wisconsin, and Wyoming. Feldman et al., at 19 n.21.

Melissa Miyashiro is Chief of Staff at Blue Planet Foundation, a 501(c)(3) nonprofit organization committed to clearing the path for 100% clean energy through advocacy, awareness, and action.

9 See generally In re Application of Hawaiian Electric et al. for Approval to Establish a Rule to Implement a Community-Based Renewable April 2016

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COURT BRIEFS Advocates for Abused and Neglected Children Needed

Maui’s Court Appointed Special Advocate (“CASA”) Program is recruiting volunteers to be trained as advocates for abused and neglected children in the Family Court system. Interested persons must attend a 30-hour mandatory CASA training program on May 16, 18, 20, 23 and 25 in Wailuku, Maui.

(Candidates must attend all training dates.)

After successful completion of the training and criminal background checks, CASA volunteers will be appointed by a judge to represent a child and advocate for the child’s best interest.

Volunteers will gather all pertinent information on the case, submit written recommendations to the judge, and attend court hearings on behalf of the child.

Interested candidates must be at least 21 years old and willing to commit between four to 20 hours per month working on a child’s case. Volunteers are typically assigned one case at a time and remain on the case until the child is placed in a safe and permanent home, which may take up to 18 months.

Attorneys who complete the CASA training may be considered for contracts as guardian ad litem or as parent counsel.

Please call (808) 244-2729 for more information.

Oahu Girls Court Celebrates Strength through Adversity

The Oahu Girls Court celebrated the 13th class who successfully completed the Girls Court program at a special ceremony held on February 11, 2016, at the Ronald T. Y. Moon Judiciary Complex. Family members, staff, and invited guests gathered to recognize the progress and accomplishments of the girls and their families over the past year.

Hawaii Supreme Court Chief Justice Mark Recktenwald praised the five girls for their achievements in the 14 April 2016

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program, and the families for committing to be a part of the girls’ healing journey. He also offered his personal thanks to the many people who make the Oahu Girls Court possible, including Girls Court Presiding Judge Jennifer Ching, the Girls Court team, and the public and private partners who support, believe in, and hold the program participants accountable.

The accomplishments of the 13th class alumni include improving relationships with family, maintaining sobriety, obtaining high school diplomas, becoming employed, completing treatment and other programs, and giving back to the community through community service.

Girls Court is the Judiciary’s innovative effort to stem the rising tide of female delinquency in Hawaii, where the proportion of female juvenile arrests has been significantly higher than the national average. Hawaii launched one of the nation‘s first Girls Court models in 2004 on Oahu. It has proven to be a remarkable success. Studies show that Girls Court participants have committed 88% fewer violations of the law, 98% fewer status offenses, the number of runaways has decreased by 89%, and the number of days girls remain runaways has been reduced by 68%.

Girls Court provides gender-specific programs and services that more effectively target at-risk and delinquent girls.

It works on a strength-based model to develop healthy relationships among the girls and their families, return the girls to school or appropriate educational programs, and introduce the participants to employment education and other opportunities in the community.

In Girls Court, the girls and their families attend regular court hearings and meetings with the Girls Court probation officers and therapist. They also join activities that they may have never participated in on their own, such as surfing, playing bingo with the elderly, cleaning out a loi, and more. Through

the Girls Court process, they realize their strengths and their personal value in the bigger picture of life.

For more information, visit the Hawaii Girls Court website at www.girlscourt.org.

New Technology for Hearing-Impaired at Honolulu District Court

Right to left – Sally Ragmat of Honolulu District Court Legal Documents Branch demonstrates the new “UbiDuo” to First Circuit Deputy Chief Court Administrator Calvin Ching and First Circuit Deputy Chief Judge Barbara Richardson.

A new Access to Justice device designed to help better serve the deaf and hearing-impaired was recently purchased for the Honolulu District Court.

Using a pair of terminals that communicate wirelessly, individuals are able to have a conversation in real time. The technology allows deaf or hearingimpaired individuals to type questions or comments that court staff can respond to as text appears on both screens instantaneously.

All Legal Documents counter staff have been oriented to the UbiDuo. It is a faster and more effective method of communication than the pen and paper method.

The Judiciary is creating procedures to eventually make the technology available at all offices in the Honolulu District Court and rural courts. The Deputy Chief Court Administrator’s Office currently provides American Sign (Continued on page 26)

HSBA HAPPENINGS Board Action Summary

For your information, the HSBA Board took the following actions at its meeting in January: • Ratified the appointment of Andrew Park as the eighth attorney member to the Hawaii State Trial Judges Association-Hawaii State Bar Association joint committee; • Approved requests to waive the 2016 HSBA dues and processing fees from two members who requested the status “inactive for medical reasons” in accordance with Rule 17(d)(8) of the Rules of the Supreme Court of the State of Hawaii; • Voted to take no further action on the admission date errors in the 2016 Annual Bar Directory; • Approved the request of the Natural Resources Section to change its name to the Environment, Energy, and Resources Section; • Voted to remove the HSBA President’s signature from the Judiciary letter asking for participation in the Judiciary’s judicial evaluation in order to lessen the confusion among HSBA members on whose judicial evaluation is being conducted; • Voted to appoint Mark K. Murakami to the Hawaii Access to Justice Commission to fill the seat of a resigning board member for the remainder of a term, which expires on December 31, 2017; • Voted to appoint Jeffrey K. Sia to the Hawaii State Bar Foundation Board to fill the seat of a resigning board member for the remainder of a term, which expires on December 31, 2016; and • Determined that the substance of the following measures are germane to the purpose of regulating the legal profes16 April 2016

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sion: SB2239/HB2139 proposes a constitutional amendment to establish judicial elections; SB2238/HB2138 calls for a study on methods to implement a judielection system; and cial SB2420/HB2140 proposes a constitutional amendment to require the consent of the Senate for judicial retention.

Voted to oppose these measures, and inform HSBA members of the Board’s intent to submit opposition testimony.

Co-sponsorship of HWL Lunch Program

The HSBA is excited to announce its co-sponsorship of the Hawaii Women Lawyers’ (“HWL”) Lady Lawyers lunch program in 2016. This collaboration was established to better serve HSBA members by expanding access to the informative HWL lunch programs via live streaming webcast to HSBA members on the neighbor islands and by allowing members to earn CLE credit for certain qualifying programs.

CLE Credit Guidelines: Registration is required for all CLE credit registrants.

Registrations for CLE credit registration will close at 12:00 p.m. HST on the Friday before the program is scheduled. A fee of $25 (HWL members) or $30 (non-HWL members) is required to earn CLE credit. There will be no retroactive CLE credit registration nor will refunds be given for no-shows. Walk-ins will not be eligible for CLE credit.

Live Webcasting Guidelines: Live webcast is available for anyone interested. Registration is required for all webcasters. Registration for live webcasting will close at 12:00 p.m. HST on the Friday before the program is scheduled.

The fee of $25 (HWL members) or $30 (non-HWL members) will be charged only for those webcasters who wish to earn CLE credit. CLE credit registrants must submit their credit request online at the end of the program for certification purposes.

Live Attendance (non-CLE registrant) Guidelines: Live attendees are

strongly encouraged to register online at no cost. A limited number of seats will be set aside for walk-ins.

Please save these dates for future programs in 2016: April 25, May 23, June 27, July 25, August 22, September 26 and October 24. All programs will be held at the HSBA Conference Room at 1100 Alakea Street, Suite 1000 from 12:00 to 1:00 p.m.

Questions?

Please contact CLE@hsba.org or 537-1868 and ask for the CLE Department.

2017 HSBA Board Nominations

Consider offering your expertise or fresh ideas to the HSBA Board by running in the next election. The following officer positions (one-year term) will be available beginning January 2016: Vice President, Treasurer, and Secretary.

The following director positions (twoyear term) will be available: six for Oahu, one for Maui, and one for East Hawaii. Board members from Kauai and West Hawaii are currently serving a two-year term set to expire in December 2017. If interested, email a cover letter & resume to the HSBA Nominating Committee (nominations@hsba.org) by April 22, 2016. The Committee will have a slate ready by the end of May and discourages any campaigning before that time.

Member Benefits Spotlight

New benefit - Island Air: HSBA members are eligible for a 10% discount off of web fares. Reservations can be made directly on www.islandair.com.

For reservation instructions sign in to your member account. Once you are signed in to your account, please click on “My Account” > “Benefit-Island Air.” Also check out the Island Air Travel Pak: https://www.islandair.com/travel-pak.

New benefit Honolulu Club: HSBA members receive discounted membership to the Honolulu Club.

Contact Natalie Yong at (808) 539-8100

for details. Present your HSBA bar card to receive this new benefit.

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44th Annual Law Day Golf Tournament

The HSBF and HSBA are once again co-sponsoring the Annual Law Day Golf Tournament on Friday, May 13, 2016, at Mamala Bay Golf Course at Hickam Air Force Base. The tournament has a 44-year history, which allows avid (and not so avid) golfers to enjoy a day on the greens.

The Golf Tournament will begin with a shotgun start at 12:30 p.m. sharp. The maximum capacity is 144 players, which will be filled on a first-come, first-served basis. The reasonable tournament fee includes course and cart fees and the entertaining post-tournament awards banquet. Deadline for applications is April 8, 2016. For more information, please contact Calvin Young at calvin.young@hawadvocate.com.

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700 Bishop Street, Suite #2100, Honolulu, HI 96813 (808) 535 8467 • www.PacLaw awT Team.com Te

Law Week

Mark your calendars for the annual Law Day event sponsored by the Young Lawyers Division. Law Day is an excellent pro bono opportunity for attorneys to provide legal information (not legal advice) to members of the public at free legal clinics throughout the State. On Oahu, Maui, and Hawaii Island, legal clinics will be held on Saturday, May 7, 2016, from 10:00 a.m. to 2:00 p.m. at Don Quijote Kaheka, Pearl City, and Waipahu; Waianae Mall; Windward Mall; Maui Mall; KTA-Puainako; and KTA-Palani Road. On Kauai, a legal clinic will be held on Friday, May 6, 2016, from 10:00 a.m. to 2:00 p.m. at the Judiciary Self-Help Center.

Volunteer attorneys will be asked to sign up for two-hour shifts. No specific area of expertise is needed in order to volunteer. Brochures and other materials will be provided for handouts. Common questions relate to subjects such as bankruptcy, child custody, divorce, elder care, employment law, estate planning, landlord tenant, and wills and trusts. If you would like more information or want to volunteer for the program, please contact the Law Day Committee at yldhawaii@gmail.com.

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17

by Mark T. Shklov and Nathan C. Yang, with Xinhua Di

Investment, Corporate Governance, and Business Transactions and Disputes. In 2007, Xinhua Di visited the United States as a member of a delegation sponsored by the Jiangsu Provincial Government and Visiting Scholar Program of the University of Maryland (the “UMD”). While in the U.S., he

questions about China, its legal profession, and its relationship to Hawaii.

Here is the friendly Q&A between the Hawaii lawyers (“HL”) and Xinhua:

Xinhua Di is a young lawyer from Suzhou, China, which, along with nearby Hangzhou, shares the title of HL: When did you begin learning “Paradise on Earth” in the East because to speak English? of its classical gardens and picturesque canals. Xinhua recentXinhua: I began ly spent three months learning English in the in Honolulu as part of fifth grade. In China, the Hawaii State Bar English is a compulsory Association’s Visiting course in elementary China Lawyer school. Believing that Program. This proknowledge of English is gram, in its eighth year, an essential asset for the is a collaboration Chinese, the governamong the Shanghai ment began requiring and Suzhou Bar that elementary stuAssociations, their dents study English. As respective Judicial China opened its doors Bureaus, and the to the world, foreign Hawaii State Bar ideas and customs Association (the entered the country “HSBA”). Under the through the exchange program, attorneys are of language. The abiliplaced with local law ty to speak English firms and have the allows Chinese to interchance to learn from act more productively local lawyers and with other cultures. exchange information Even after elementary about current trends school, studying English (From Left): Xinhua Di, Mark Shklov, and Nathan Yang and legal developremains compulsory for ments. The goals of students in high schools the Visiting China and universities.

Lawyer Program are to As for other languages introduce China’s in Suzhou, there are young lawyers to many university stuHawaii and present dents learning Japanese opportunities for color Korean because laboration and mutualthere are many ly beneficial relationJapanese and Korean ships between the legal companies there. If communities of Hawaii and China. obtained a Certificate of World Trade you can speak Japanese or Korean, you Xinhua Di is the chair of ForeignOrganization/International Trade Law will have an advantage when applying for related Legal Affairs in the Suzhou issued by the UMD and the International a job in these companies.

Office of the Jiangsu Hengding Law Law Institute under Georgetown Firm (“Hengding”). Hengding is a fullUniversity.

HL: When did you know you service law firm with 3 offices (one each Before Xinhua returned to China, a wanted to become a lawyer? in Nanjing, Suzhou, and Yancheng) and few young Hawaii lawyers, Shirley LouWhat do you enjoy most over 100 attorneys in Jiangsu, China.

Magnuson, an associate at Carlsmith Ball about your work?

After receiving a law degree from the LLP, and Justin Sugiyama and Nathan Kenneth Wang School of Law, Soochow Yang, both associates at Cades Schutte Xinhua: I knew I wanted to become a University in 2002, Xinhua Di began his LLP, met with him informally to ask him lawyer when I was in high school. At that legal career, focusing on Foreign time, I watched many movies and TV

From One Paradise to Another:

A Cross-Cultural Conversation on Traveling from

u o to awaii h z u S H

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series about lawyers from Hong Kong and America. The lawyers in those movies and TV shows were so cool because they seemed to know everything.

They could save innocent people and see to it that criminals received their due punishment.

Adding value for my clients is what I enjoy most about being a lawyer. Helping clients navigate the law—which may initially seem very murky—to achieve their goals is very satisfying. The appreciation clients express when they tell me that they are fortunate to have a great lawyer is what motivates me in my work.

HL: What is a normal day of work like for you?

Xinhua: I first check my email and respond to clients. After that, I usually have hearings scheduled, for which I will appear in court on behalf of clients. On days when no hearings are scheduled, I work on legal opinions regarding various issues related to foreign investment, corporate governance, or business disputes.

I will also prepare for upcoming court appearances in the afternoon.

For lunch, I meet with clients or eat with my colleagues. Bouncing ideas and legal theories off other attorneys in my firm is a great way to refine my arguments. My afternoons may involve more meetings with clients and government officials. Unscheduled events also arise, such as calls from clients requesting strategic advice on litigation matters, judges, or court proceedings.

My office is in the Suzhou Industrial Park, where a number of foreign companies, including many Fortune 500 companies, have their offices and factories. I usually arrive at the office at 8:00 a.m. and leave at 6:00 p.m.

Having dinner with clients and friends after work is very common in China and a great time for networking.

We go to different restaurants in the city to try different foods and drinks.

Cantonese cuisine is my favorite. In addition, I attend events held by clients or friends who are from different industries, government agencies, trade associa-

tions, or chambers of commerce. Such events give me a platform to meet potential clients and enhance relationships with current clients.

HL: What are three main differences between American law and Chinese law?

Xinhua: First, the two countries have different legal systems. America uses the common law system while China follows a civil law system. In American courts, prior cases serve as the basis for judicial decisions. As a civil law country, Chinese laws exist in the form of statutes, and the legal system is based on a compilation of statutes. Judicial decisions are made only in accordance with the statutes; judges apply the statutes and cannot create law.

One judge’s opinion in a prior case cannot form the foundation for subsequent rulings.

The second difference is the existence of the jury. In America, the jury plays an important role in finding the facts of a case and rendering a verdict.

No jury, however, exists in the Chinese legal system. Judges find all the facts, apply the law, and deliver judgments.

Taking on more of an inquisitorial role, Chinese judges direct the fact gathering, nominate witnesses, and guide the parties to resolution. This hierarchical model seems different from the more impartial arbiter role of judges in U.S. courts.

Third, the U.S. and China differ in the organization of their courts. The U.S. federal and state governments have different court systems to enforce laws.

Each court system also operates independently and separately from the other.

Chinese courts, in contrast, are all in one system, but organized into four levels based on administrative hierarchy.

Districts and counties are under control of a city. Cities are under the jurisdiction of provinces. Autonomous regions and special municipalities are separate from, but akin to, provinces. The higher courts have the power to oversee the lower courts within their jurisdictions. At the lowest level are the district courts, which

govern city districts. Next are the intermediate courts, which operate at the city level. Above those, and at the secondhighest level, are the high courts that adjudicate cases from the provinces, autonomous regions, and special municipalities, such as Shanghai and Beijing.

The highest court in China is the Supreme People’s Court, and it has three responsibilities. The court has original jurisdiction over cases that have the greatest influence on the country. It has the power of appellate review over lower court decisions. The court also provides advisory opinions on specific laws and judicial processes that will be implemented around the nation.

HL: Does China have law schools?

What are the requirements for becoming a lawyer in China?

Xinhua: Yes, almost all comprehensive universities have their own law schools.

Comprehensive universities are those that offer relatively complete academic programs and are strong in scientific research.

The process for becoming a lawyer, including a judge or prosecutor, in China is long and involves multiple stages. One must first pass the National Judicial Examination (“Examination”) and only those who have a Bachelor of Laws (LL.B.) degree, or a minor in law, can sit for the Examination. The Examination is held once a year in cities across the country. The Examination has multiplechoice questions, as well as short answer, case study, and essay questions. Only about 10% of those taking the Examination receive a passing score.

After passing the Examination, attorneys-to-be must work in a law firm as an apprentice lawyer for one year. At the end of that year, they must take a test for apprentice lawyers conducted by their local city bar association’s special commission. Only upon passage of that test, can one apply for admission to the Chinese bar and receive a license to practice law officially.

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HL: What is the process for becoming a partner in a Chinese law firm? What are the general partnership criteria?

Xinhua: Each firm has its own specific standards and no overall legal requirements on becoming a partner in a Chinese law firm exist. Generally, however, three years of practice, in addition to the mandatory apprenticeship period discussed earlier, is the minimum amount of experience needed to become a partner. Revenue generation and legal expertise in a specific field are important criteria for partnership consideration.

In my firm, it takes about 7 years to become partner.

HL: In China, what does business development involve? How do you meet new clients?

Xinhua: Business development in China involves meetings, seminars, dinners, promotions, and various professional and social events. I can meet new clients in different settings. Family, relatives, friends, and even existing clients will introduce me to their relatives or friends who face legal issues or disputes, if they trust me. My firm sometimes hosts events and invites potential clients to attend. Trust and familiarity, based on one’s personal network, are the keys to building all relationships in China.

Cultivating relationships with those in government is also prudent and can lead to new business when those contacts need legal assistance. Government agencies, associations, chambers of commerce, and companies have invited me to hold seminars and give presentations on legal developments. I have met new clients this way. Should all else fail, newspaper and internet advertisements can help.

HL: I have heard about “One Belt, One Road” (aka the “New Silk Road”). What is it?

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Xinhua: “One Belt, One Road” (or “B&R”) refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road initiative. “One Belt” means the Economic Belt of the Silk Road, and “One Road” means the 21st Century Maritime Silk Road, both first proposed by President Xi Jinping in 2013. The concept behind this initiative originated from the Silk Road trading route created during the Han Dynasty (202 BC - 220 AD). The road connected China with Europe through the silk trade.

B&R seeks to promote cooperative development and economic partnership between China and countries along the ancient Silk Road route. Existing multilateral mechanisms and regional cooperation platforms serve as the basis for the initiative. Joint discussion, project investment, and infrastructure expansion will lead to mutual benefits for China and its partners.

HL: What do you like about Hawaii? What have you done in Hawaii that has been a good experience?

Any bad experiences?

Xinhua: I like Hawaii because it is not only a paradise with beautiful natural scenery, but it is also a place where eastern and western cultures converge.

Here, I can learn how American lawyers handle cases and draft agreements for business transactions in Hawaii’s unique environment. Although I am in a foreign country, I do not feel too far from home because of the familiar culture. I attended the 2015 HSBA Bar Convention, which was not only an informative learning experience, but one where I made new connections in Hawaii’s close-knit legal community. Participation in the seminars and discussions with my American counterparts helped me to gain a better understanding of America’s legal system.

Also, I learned much from visiting Iolani Palace.

Attending my first

Christmas Party was another highlight.

It was a very festive occasion. I was glad to see colleagues outside of the office and celebrate the holidays with them. I might even bring such a celebration back to my firm. So far, so good.

HL: What do you think are the most attractive investments for Chinese citizens in the U.S.?

Xinhua: Education and real estate are the most attractive investments for Chinese citizens in the U.S. America has the best universities in the world, so more and more parents are sending their children to America to study. More and more Chinese young people also plan to study in the U.S. Attending school in the U.S. is one way to become familiar with U.S. culture, and not just its language.

As for real estate, Chinese investors may consider purchasing real estate in America if they plan to remain in the States for a long time. Working, studying, or developing a business are all reasons to stay here. The ability to own one’s own house and the land on which it sits, which does not happen in China (since individuals cannot own land privately in China), makes purchasing real property here that much more attractive.

Much long-term potential exists for Chinese investment in the U.S. HL: How can Hawaii improve its attraction for Chinese investors? What can Hawaii do to build its relationships with Suzhou or greater China?

Xinhua: For most Chinese, tourism is currently the only industry associated with Hawaii. To improve its attraction for Chinese investors, Hawaii might consider setting up a one-stop service center where investors can ask questions, handle investment procedures, or find professionals, such as accountants and lawyers.

Preparing a guide to investing in Hawaii,

that details existing and potential programs, would be very helpful as well.

The guide can refer investors to specific government departments for various types of questions, if no one-stop service center exists. To market its appeal to Chinese investors, the State could also sponsor officials and industry leaders to pitch Hawaii investments in China or participate in exhibitions.

Hawaii already promotes tourism - the same should be done for investment.

As for building relationships with Suzhou or greater China, efforts should be focused at the government level, which is where key development decisions are initiated in China. Hawaii can designate a specific state agency or department whose employees are responsible for communicating with corresponding departments in Chinese municipal governments. For example in Suzhou, the Foreign Affairs Office of Suzhou Municipal Government is in charge of this type of foreign affairs. In addition to sending delegations to China, the State could collaborate with Chinese governmental agencies that can promote Hawaii on the ground.

Focusing on non-governmental exchange is another way to build relationships. Chambers of commerce or industrial associations in Hawaii can cooperate with corresponding chambers and associations in China. Such cooperation can be less bureaucratic, and as a result, be more extensive and stable. In the long-term, successful non-governmental exchange can establish a channel for information-sharing that can enhance investment opportunities.

HL: Traveling in the other direction what is the safest way for foreigners to invest money in China?

Xinhua: The safest way for foreigners to invest in China is to find a Chinese partner who is familiar with and sensitive to the specific market in which you would like to invest. The Chinese partner must

have a good relationship with government authorities and be reliable and trustworthy. In any industry, the combination of a good Chinese partner, good management, and advanced technology with foreign-infused capital could be the safest way to invest in China.

HL: What type of business would be a good investment? What factors contribute to the success of a foreign investment company in China?

Xinhua: I cannot say which particular type of business in China would be a good investment, but certain principles contribute to the success of foreign investment in Chinese companies. These principles are: (1) focus on your specific field, (2) maintain managerial and technical advantages over competitors, (3) keep updating technology and management, and (4) find a reliable partner.

Let me explain a little. First, focus on your strengths and create the best product or service in your industry, one in which you presumably have a certain degree of familiarity and industry knowledge. Second, upgrade technology to improve quality and lower cost; also keep your management team in a problemsolving mindset. Third, be sensitive to market trends and respond immediately to changing market conditions and customer demands. These shifts happen frequently in China. Fourth, I cannot stress enough the importance of a reliable partner who is trustworthy, has a good relationship with the competent authorities, and truly knows the domestic market. If your business applies these principles, it will likely be a good vehicle for foreign investment.

HL: Many people are interested in visiting and doing business with China. What are a few key things visitors should know in order to have the best interaction with Chinese?

Xinhua: Knowledge of the Chinese language, an understanding of Chinese culture, and an honest attitude will help visitors have the best interactions.

Chinese are friendlier with those who can speak Mandarin (or the relevant dialect) and they will be willing to have conversations that are more meaningful.

Language is also the key to understanding Chinese culture. For example, the manner of greeting exchanged between parties can reflect the two parties’ relationship. If they say, “glad to see you” in Chinese, it usually means this is a first meeting. If they say, “have you eaten yet” in Chinese, the parties are more likely friends or familiar acquaintances.

Knowing Chinese will help you understand Chinese culture more easily.

Just as in most places, remaining positive makes it much easier to meet friends in China. As a cultural practice, Chinese are not usually willing to express opinions directly to strangers. The concept of “face,” represents a person’s honor or dignity. Embarrassing a Chinese person, even inadvertently, especially in public, is a quick way to make enemies in China. However, if you are optimistic and tolerant, Chinese will appreciate your efforts to connect with them and communicate genuinely. _________________ Mark T. Shklov is a longtime HSBA member who maintains a solo practice in Honolulu.

He has been closely involved with the InterPacific Bar Association, an international bar association of which he was its first At Large United States Council Member.

Nathan C. Yang is a new HSBA member and an associate at Cades Schutte LLP in Honolulu. He has studied and lived in China and looks forward to continued involvement in the Visiting China Lawyer Program and opportunities for Hawaii on the international stage.

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CA S E N OT E S Supreme Court Civil Procedure

Greer v. Baker, No. SCWC-150000034, February 22, 2016, (Recktenwald, C.J.). This case arises from a lawsuit filed by the former Chief of the General Medical & Preventative Services Division at the Department of Health (Greer). Greer’s complaint alleged that his position was eliminated in retaliation for whistleblowing activities. Greer raised three claims for relief: Count I—violation of the Hawaii Whistleblowers Protection Act (HWPA); Count II—intentional infliction of emotional distress (IIED); and Count III— negligent infliction of emotional distress (NIED).

Defendant State Senator, Rosalind Baker, moved to dismiss the Complaint on the grounds that: (1) she is immune from suit based on legislative immunity; (2) the claims were untimely under the applicable statute of limitations; and (3) the Complaint failed to state a claim upon which relief can be granted. The circuit court denied the motion to dismiss based on legislative immunity. The court granted Baker’s motion as to the HWPA and NIED claims, but denied it as to the IIED claim. Baker appealed to the Intermediate Court of Appeals from the circuit court’s order granting in part and denying in part her motion to dismiss.

Baker asserted that, based on Abercrombie v. McClung, 54 Haw. 376, 507 P.2d 719 (1973), the order was an immediately appealable final order to the extent it denied her defense of legislative immunity. The ICA dismissed. Baker timely petitioned for a writ of certiorari.

The Hawaii Supreme Court concluded that the ICA had jurisdiction to hear Baker’s appeal because the circuit court’s order was an immediately appealable collateral order.

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HAWAII BAR JOURNAL

Appeal Pointers

An appeal is in default if the opening brief is not filed within 40 days after the record on appeal is filed or within any extension of the 40-day period. Relief from default must be obtained from the appellate court.

Failure to cure the default may result in monetary sanctions or dismissal of the appeal. HRAP 28(b) and 30.

Insurance

Ito v. Investors Equity Life Holding Co., SCAP No. 10-0000131, February 22, 2016, (Nakayama, J. with Pollack, J. dissenting). Investors Equity Life Holding Company (IELHC) is the former parent company and sole shareholder of Investors Equity Life Insurance Company of Hawaii, Ltd. (IEL). In 1994 IEL was liquidated, thus creating the IEL estate. The Hawaii Insurance Commissioner (Commissioner) was appointed as IEL’s liquidator (Liquidator). This case concerned the Liquidator’s denial of IELHC’s purported claim to all remaining assets of the IEL estate.

In 2009, the Liquidator determined that IELHC’s letters and its California Lawsuit constituted a claim against IEL’s estate. The Liquidator denied the claim, and his determination was upheld by the circuit court.

This appeal presented a question of first impression of whether IELHC’s letters to the Liquidator and the California Lawsuit constituted a claim against IEL’s estate. In its opening brief, IELHC raises five points of error: (1) “The circuit court below had no subject matter jurisdiction to confirm an ‘IELHC claim’ which [Commissioner] Schmidt himself contrived, but which appellant has not brought”; (2) “The circuit court had no personal jurisdiction over appellant”; (3) “Because the

California lawsuit is a prior pending action, the ‘IELHC claim’ which [Commissioner] Schmidt invented must be abated”; (4) “The summary procedures utilized by the circuit court denied appellant’s rights to due process”; and (5) “Even if appellant had brought the ‘IELHC claim,’ which appellant had not, [Commissioner] Schmidt is judicially estopped from asserting that appellant’s claim is too late.”

The Hawaii Supreme Court held that the circuit court did not err in concluding that IELHC asserted a claim against IEL’s estate and that this claim was time barred. Furthermore, the circuit court had personal jurisdiction over IELHC and subject matter jurisdiction over IELHC’s claim, there were no grounds for abating the adjudication of IELHC’s claim, and the circuit court’s procedures met constitutional due process requirements.

Pollack, J. dissented, stating that the majority’s holding that IELHC’s two letters to the Liquidator and a California lawsuit substantially conformed to the proof of claim requirements, and thus he also disagreed with the majority’s conclusion that the circuit court, sitting in liquidation proceedings under the ISRLA as the Liquidation Court, did not abuse its discretion in affirming that the two letters and the lawsuit constituted a claim against the estate of IELHC.

Intermediate Court of Appeals Civil Procedure

State v. Nilsawit, No. CAAP-150000372, February 18, 2016, (Foley, J.).

This matter arose out of Appellant Hawaii New Now’s application for extended coverage and order. Appellant contended the district court erred: (1) in holding the State had met its burden for limiting extended coverage; (2) because

the Findings of Fact contained in the Coverage Order were insufficient to serve as a basis for limiting extended coverage; and (3) when it based the denial in the Appeal Order on Appellant’s decision not to file for administrative review.

Rules of the Supreme Court Rule 5.1(f)(8) provided one avenue for review of a court’s order regarding a request for extended coverage. Rule 5.1(f)(9) provided an alternate avenue, in which a party may challenge the court’s order as if it were an interlocutory order. However, Appellant failed to comply with the administrative review process provided in Rule 5.1(f)(8) for orders regarding requests for extended coverage and therefore, the ICA concluded that it lacked jurisdiction over the appeal.

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Foreclosure

U.S. Bank N.A. v. Mattos, No. CAAP14-0001134, February 12, 2016, (Foley, J.). Appellants argued that: (1) the assignments of mortgage were invalid because the signer and notary were “robo-signers”; (2) Appellee lacked standing to foreclose on the mortgage because the assignments violated the securitized trust’s Pooling and Servicing Agreement when it attempted to assign the mortgage to Appellee after the securitized trust had closed; and (3) Appellee lacked standing to foreclose because New Century did not assign the underlying note to Appellee. The ICA affirmed the summary judgment in favor of Appellee. The allonge on the note indicated that it was the holder at the time of the foreclosure; the note was an exhibit to a declaration that stated that all exhibits were certified true copies.

Moreover, the declaration established that Appellee relied on the documents related to the loan, there were further indicia of reliability given Appellee’s business practices, and the documents constituted records of regularly conducted activity admissible as a hearsay exception.

w w w. Fa i r M e d i a t i o n . c o m

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Gifts from Clients: Yes or No

by Lennes N. Omuro You have done outstanding work for your client and made or saved your client a huge amount of money. After the work is finished and your last invoice is paid, your client sends you a flower arrangement, which you appreciate and looks nice in the office. But what do you do if you open the card that comes with the flowers and there is a big fat check made out to you? Alternatively, you have done legal work for a wealthy client for many years. The client has no close family members and asks you to prepare documents naming you to the lucrative position as executor of his or her estate or which provides a large testamentary gift for you. Besides jumping for joy, what do you do? What should you do?

Hawaii Rules of Professional Conduct ("HRPC"), Rule 1.8(c) provides as follows: Rule 1.8. Conflict of Interest: Prohibited transactions. *** (c) A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client.

For purposes of this paragraph, related persons include a spouse, child, grandchild, parent, grandparent, or other relative or individual with whom the lawyer or the client maintains a close, familial relationship.

Rule 1.8(c) makes it clear that a lawyer is prohibited from soliciting a substantial gift from a client, including a testamentary gift, unless the lawyer and client are related. But what is a substantial gift? Comment 6 to Rule 1.8 states that a lawyer may accept a gift from a client "if the transaction meets general standards of fairness." Examples of per24 April 2016

HAWAII BAR JOURNAL

missible gifts listed in the comment include "a simple gift" such as "a present given at a holiday" or "as a token of appreciation." Although this comment provides some guidance, obviously different persons may have differing views on what is a "simple gift" or what meets "general standards of fairness." Some ethics committees in other jurisdictions have examined this issue in more detail.

For example, in California Opinion 2011-180 (undated), the committee indicated that the following factors should be determined in considering whether a gift is substantial: [T]he monetary value of the gift, nature of the gift, the fairness of the transaction, the appropriateness of the lawyer's actions or behavior, the sophistication of the client, the emotional or sentimental value of the gift, whether the gift is substantial from the perspective of the client, and whether the gift is substantial from the perspective of the attorney.1 On its face, Rule 1.8(c) does not prohibit a lawyer from accepting an unsolicited substantial gift from the client.

Comment 6 to this Rule, however, indicates that such a gift "may be voidable by the client under the doctrine of undue influence which treats client gifts as presumptively fraudulent." This presumption puts the burden of proof on the lawyer to establish that the gift was not the product of undue influence.

Accordingly, the lawyer may want to consider advising the client to seek the advice of an other law yer in su ch sit uat ions.

For example, the Restatement (Third) of the Law Governing Lawyers (2000), Section 127(2) suggests a possible third exception to the general rule against receiving gifts from clients beyond the exceptions under Rule 1.8(c) for a gift that is not substantial or in circumstances where the lawyer is related to the client. The Restatement suggests that it may also be permissible for a lawyer to accept the gift when the client has received independent advice from

another lawyer or has been encouraged to seek such advice. Although this third exception is not specifically incorporated into Rule 1.8(c), having the client seek or advising the client to seek independent counsel should provide grounds for arguing against the presumption of undue influence.

Next, if the effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, Comment 7 to Rule 1.8(c) states that the client "should have the detached advise that another lawyer can provide" and that the "sole exception to this Rule is where the client is a relative of the donee." Therefore if a client wants to leave the lawyer or a person related to the lawyer a substantial bequest, the lawyer should, as a practical matter, generally avoid drafting the will, trust or other instrument. The lawyer should also keep in mind that having another lawyer in the firm draft the instrument may not avoid the conflict. Indeed Rule 1.8(k) provides that while lawyers are associated in a firm, the prohibitions set forth in paragraphs (a) through (i) of Rule 1.8 that apply to any one of them shall apply to all of them.

On the other hand, Rule 1.8(c) does not prohibit the lawyer from being named as the executor of the client's estate or to another potentially lucrative fiduciary position. Comment 8 to the Rule does, however, state that "such appointments will be subject to the general conflict of interest provision in Rule 1.7" when there is "a significant risk that the lawyer's interest in obtaining the appointment will materially limit the lawyer's independent professional judgment in advising the client concerning the choice of an executor or other fiduciary." The comment goes on to state that when obtaining the client's consent to the conflict, the lawyer "should advise the client concerning the nature and extent of the lawyer's financial interest in the appointment, as well as the availability of alternative candidates for the position."

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Finally, one of my partners recently reminded me of a lawyer's joke where the lawyer tells his friend that the lawyer has an ethical dilemma because a client gave the lawyer a large gift. When asked what the dilemma was, the lawyer replied "do I have to tell my partners?"

Lawyers should keep in mind not only fiduciary duties owed to their clients but also any duties that they may owe to their law firm. Although it is unlikely that any firm would demand that a lawyer share a box of cookies given by a client (although it would be nice of the lawyer to leave the box at the coffee station), what happens if the lawyer gets a truly sizeable monetary gift or an extremely valuable painting or other extraordinary tangible gift?

Consideration should at least be given whether this is truly a gift to the individual lawyer or whether this is in lieu of compensation to the firm for work provided by the firm.

Gifts from clients should be evaluated according to the particular circumstances of each gift. True gifts from clients are always appreciated, but lawyers should be aware of the ethical prohibitions that may apply and seek appropriate advice when needed. _________________ 1 The lawyer violated the California ethics rule when soliciting a gift consisting of a week at the client's vacation home to "recharge the lawyer's batteries" valued at $5,000. See also, New Hampshire Opinion 2011-12/7 (April 11, 2012) (one time gift from a fairly wealthy client consisting of theater tickets and $200 for a lawyer and her husband to go to dinner in appreciation of the lawyer's services over the years would probably be viewed as insubstantial and not prohibited by Rule 1.8(c)).

Lennes Omuro is a partner at Goodsill Anderson Quinn & Stifel and a member of its litigation section. He has also served as his firm's Professional Responsibility Committee Chairperson and as in-firm Counsel.

COURT BRIEFS (Continued from page 14) Language interpreters or assisted listening devices for the hearing impaired. The UbiDuo will augment current services and advance the ongoing efforts to increase access to justice in the courts. The Judiciary hopes to expand use of the new technology statewide in the future.

Jonathan Chun Appointed as Fifth Circuit Per Diem Judge

Jonathan J. Chun was sworn in on February 22, 2016 by Chief Judge Randal Valenciano, to serve a fouryear term as a per diem judge of the District Court, Fifth Circuit. His term is from March 2, 2016 to March 1, 2020.

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HAWAII BAR JOURNAL

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We offer custom-designed programs to meet the individual needs of every firm. Our standard programs, which include a larger area of coverage (from Ward to Iwilei) and our super-rush service, is what separates us from the competition. Our experienced professional messengers know the ins and outs of Hawaii’s court system, and utilize the latest in communications and technology to provide a level of accountability and accuracy second to none. Call today and let us show you the Legal Express difference.

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Notice for Reappointment of Incumbent Magistrate Judge Kevin S.C. Chang The current term of office of United States Magistrate Judge Kevin S.C. Chang expires on December 19, 2016.

The United States District Court is required by law to establish a panel of citizens to consider the reappointments of magistrate judges to a new eight-year term.

The duties of a magistrate judge in this court include the following: (1) conduct preliminary proceedings in criminal cases; (2) trial and disposition of misdemeanor cases; (3) conduct various pretrial matters and evidentiary proceedings on delegation from a district judge; and (4) trial and disposition of civil cases upon consent of the litigants.

Comments from members of the bar and the public are invited as to whether Magistrate Judge Kevin S. C. Chang should be recommended by the panel for reappointment by the court and should be directed to the Clerk of Court, Sue Beitia by email at <clerkofcourt@hid.uscourts.gov> or comments may be mailed to: Sue Beitia U.S. District Court 300 Ala Moana Blvd. C-338 Honolulu, HI 96850 Comments must be received by May 2, 2016.

April 2016

HAWAII BAR JOURNAL

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OFF THE RECORD Judge Barbara Takase was honored at the University of Hawaii at Hilo’s 16th Annual Distinguished Alumni and Service Awards Banquet.

She was selected as this year’s Distinguished Alumni. Judge Takase was appointed as a District Court judge in 2004 and has served as the District Court Administrative Judge since 2010.

She previously served as a per diem judge for five years, while in private practice and was a deputy prosecuting attorney for the County of Hawaii.

The Hawaii Chapter of the Associated Builders and Contractors announced that David R. Squeri of the Greater Pacific Law Office, LLLC has been named as the Associated Builders and Contractors’ Hawaii Chapter Attorney.

As the Chapter Attorney, Squeri will be assisting Associated Builders & Contractors Hawaii Chapter members with legal issues and disputes, including but not limited to contracts, general business matters, and employment law.

Associated Builders and Contractors is a national construction industry trade association representing nearly 21,000 chapter members. The Associated Builders and Contractors, Hawaii Chapter, currently represents over 170 member contractors, suppliers and service providers. Squeri is currently the Chair of the HSBA Business Law Section.

Maryann Sasaki joined the firm of Clay Chapman Iwamura Pulice & Nervell. She is a graduate of Columbia University and Harvard Law School and enjoyed a 15-year practice in New York City before relocating to Hawaii to continue practicing in the areas of business, corporate and real estate law. Warren Lance, a recent UH law school graduate also joined the firm as an associate, concentrating on litigation and financial services law. Scott I. Batterman, Reginald Y.S. Yee, and Carlos Perez-Mesa are stockholders of the firm, effective January 1, 2016. They continue servicing clients in the areas of

30 April 2016

HAWAII BAR JOURNAL

construction litigation, insurance defense and civil litigation.

Hawaii Women Lawyers will be honoring the following individuals at its Annual Awards reception on April 22, 2016 at the Plaza Club. The 2015 award recipients are as follows: Outstanding Woman Lawyer of the Year Representative Linda Ichiyama; Outstanding Judicial Achievement Award - Judge Linda K.C. Luke; Lifetime Achievement Award Marya Grambs; Distinguished Service Award - Dr. Jill Omori; President’s Award - Judge Daniel R. Foley.

Mel Masuda recently received a phone call from the Honolulu StarAdvertiser after the 88th Academy Awards ceremony. "Congratulations," said features editor Christie Wilson. "You were the only one out of 626 contestants who guessed all six Oscar categories correct in our 20th annual Oscar prediction contest." Masuda told Wilson he had been trying for all 20 years and now that he's finally won, "I'm quitting while I'm ahead--at the top--and never entering again." Masuda received $200 in free movie tickets and $40 in gift certificates from Wahoo's Fish Tacos.

News for “Off the Record”

Please send in information about movement within the bar, about elections to various boards, awards, and other news to any one of the editors on the editorial board, Carol K. Muranaka at <carol.k.muranaka@gmail.com> or Cynthia M. Johiro at <Cynthia.M. Johiro@hawaii.gov>.

Articles Wanted

If you are interested in writing either a short or long article of general interest to members of the bar, please send your submissions to Ed Kemper at edracers@aol.com; Cynthia M. Johiro at cynthia.m.johiro@hawaii.gov; or Carol K. Muranaka at carol.k.muranaka@ gmail.com; or to any of the volunteer editors on the editorial board. All submitted articles should be of significance

Hawaii Access to Justice Conference

Save the date: Friday, June 24, 2016, 8:30 to 4:15 p.m.

The Hawaii Access to Justice Conference sponsored by the Hawaii Access to Justice Commission will be an all-day event at the William S. Richardson School of Law, University of Hawaii at Manoa.

The keynote speaker will be Jonathan Lippman, former Chief Judge of the State of New York.

Morning remarks will be given by Hawaii Supreme Court Chief Justice Mark Recktenwald and Chair of the Commission, Associate Justice Simeon Acoba (ret.).

Please attend to be part of an exciting, provocative discussion about seeking justice for the underserved, including opportunities for audience participation. There will be two concurrent workshops in the morning and five concurrent workshops in two afternoon sessions.

Six CLE (five CLE and one ethics) credits have been approved for Hawaiilicensed attorneys attending this event.

(Three CLE credits may be carried forward to the next year.) to and of interest or concern to members of the Hawaii legal community. A short article is between four and eight pages, double-spaced, approximately 500 to 1,500 words.

The longer law-review type articles are published in a special issue. The Cades Foundation has been gracious and generous in funding this special issue.

These articles exceed 4,500 words. The Hawaii Bar Journal reserves the right to edit or not publish submitted material.

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