Nelson III v. Hawaiian Homes Commission.

FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
12-FEB-2025
08:03 AM
Dkt. 133 OP

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAIʻI

---o0o---

RICHARD NELSON III, KALIKO CHUN, JAMES AKIONA, SR.,
SHERILYN ADAMS, KELII IOANE, JR., and CHARLES AIPIA,
Plaintiffs-Appellees/Cross-Appellants, v.
HAWAIIAN HOMES COMMISSION, THE DEPARTMENT OF HAWAIIAN HOME
LANDS, KALI WATSON, in his official capacity as
Chair of the Hawaiian Homes Commission, 1
SANOE MARFIL, WALT KANEAKUA, ARCHIE KALEPA, PAULINE NAMUʻO,
LAWRENCE LASUA, DENNIS NEVES, MICHAEL KALEIKINI,
and MAKAI FREITAS, in their official capacities as members of
the Hawaiian Homes Commission, 2 Defendants-Appellants/Cross-
Appellees, and LUIS P. SALAVERIA, in his official capacity
as the State Director of Finance, 3 and the STATE OF HAWAIʻI,
Defendants-Appellees/Cross-Appellees.

1 Pursuant to Hawaiʻi Rules of Evidence (HRE) Rule 201 and Hawaiʻi Rules
of Appellate Procedure (HRAP) Rule 43(c)(1), we take judicial notice that
Kali Watson is the current Chair of the Hawaiian Homes Commission and is
automatically substituted as a Defendant-Appellant/Cross-Appellee in place of
William Aila, Jr.
2 Pursuant to HRE Rule 201 and HRAP Rule 43(c)(1), we take judicial
notice that Sanoe Marfil, Walt Kaneakua, Archie Kalepa, Lawrence Lasua, and
Makai Freitas are current members of the Hawaiian Homes Commission and they
are automatically substituted as Defendants-Appellants/Cross-Appellees in
place of Patricia Kahanamoku-Teruya, Randy Awo, Zachery Helm, David B. Kaʻapu,
and Russell Kaupu.
3 Pursuant to HRE Rule 201 and HRAP Rule 43(c)(1), we take judicial
notice that Luis P. Salaveria is the current Director of Finance and is
automatically substituted as a Defendant-Appellee/Cross-Appellee in place of
Craig Hirai.
FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

NO. CAAP-XX-XXXXXXX

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CASE NO. 1CC071001663)

FEBRUARY 12, 2025

HIRAOKA, PRESIDING JUDGE, NAKASONE AND MCCULLEN, JJ.

OPINION OF THE COURT BY MCCULLEN, J.

The litigation in this case began almost eighteen

years ago when Plaintiffs-Appellees/Cross-Appellants Richard

Nelson III et al., beneficiaries of the Hawaiian Homes

Commission Act (HHCA), sued the Defendants-Appellees/Cross-

Appellees State of Hawai‘i and its director of finance

(collectively, State) and Defendants-Appellants/Cross-Appellees

the Department of Hawaiian Home Lands, the Hawaiian Homes

Commission, and its commissioners (collectively, Department or

DHHL).

In their 2007 "First Amended Complaint for Declaratory

Judgment and Injunctive Relief" (2007 First Amended Complaint),

Plaintiffs claimed the State did not provide (Count 1), and DHHL

did not request (Count 2), sufficient funding to support the

HHCA's programs resulting in thousands of native Hawaiians

waiting for promised homesteads. This case is now on appeal for

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the third time following the selection of an inflation index and

its application to the fiscal year (or FY) 2015-2016.

We hold the Circuit Court of the First Circuit 4 did not

err in its selection and application of an inflation index. But

we also hold the circuit court erred in entering judgment in

favor of the State on Count 1 and in favor of DHHL on Count 2 of

the 2007 First Amended Complaint based on its findings for

fiscal year 2015-2016.

I. BACKGROUND

The background of this case was recounted in Nelson v.

Hawaiian Homes Commission (Nelson I), 127 Hawai‘i 185, 277 P.3d

279, (2012); Nelson v. Hawaiian Homes Commission (Nelson II),

130 Hawai‘i 162, 307 P.3d 142 (2013); and Nelson v. Hawaiian

Homes Commission (Nelson III), 141 Hawai‘i 411, 412 P.3d 917

(2018). We provide historical and procedural context as related

to the issues currently on appeal.

A. Historical Context

Congress enacted the HHCA to protect and rehabilitate

the "fast declining" native Hawaiian population. 59 Cong. Rec.

7448 (1920). By dedicating over 200,000 acres of former

government and crown lands for a homesteading program, Congress

hoped to "place the Hawaiian back on the soil" and thereby avert

4 The Honorable Jeffrey P. Crabtree presided. Other circuit court
judges presided over the previous remands.

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"the entire disappearance of the Hawaiian race in the not

distant future." 59 Cong. Rec. at 7448-7449, 7453; 1995 Haw.

Spec. Sess. Laws Act 14, § 1 at 696.

The HHCA was later incorporated into the state

constitution as a condition of statehood. Admission Act, Pub.

L. No. 86-3, 73 Stat. 4 (1959), reprinted in 1 Hawai‘i Revised

Statutes at 135–36 (2009).

Cognizant of DHHL's "monumental and eternal dilemma in

funding[,]" delegates to the 1978 Constitutional Convention

(ConCon) introduced, and Hawai‘i voters ratified, an amendment

requiring the legislature to "make sufficient sums available for

. . . the administration and operating budget of the department

of Hawaiian home lands[.]" Nelson I, 127 Hawai‘i at 189, 198-99,

277 P.3d at 283, 292-93 (some emphasis omitted; internal

quotation marks omitted) quoting Debates in Committee of the

Whole on Hawaiian Affairs, Comm. Prop. No. 11, in 2 Proceedings

of the Constitutional Convention of Hawai‘i of 1978

(2 Proceedings), at 410 (1980)).

As a result, our state constitution now requires the

legislature to "make sufficient funds available" for four

specific purposes including, as relevant to this appeal, DHHL's

administration and operating budget:

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The legislature shall make sufficient sums available for
the following purposes: (1) development of home,
agriculture, farm and ranch lots; (2) home, agriculture,
aquaculture, farm and ranch loans; (3) rehabilitation
projects to include, but not limited to, educational,
economic, political, social and cultural processes by which
the general welfare and conditions of native Hawaiians are
thereby improved; (4) the administration and operating
budget of the department of Hawaiian home lands; in
furtherance of (1), (2), (3), and (4) herein, by
appropriating the same in the manner provided by law.

Haw. Const. art. XII, § 1 (emphases added); Nelson I, 127 Hawai‘i

at 189, 277 P.3d at 283. Our supreme court noted that despite

this constitutional mandate, "the State has failed, by any

reasonable measure, under the undisputed facts, to provide

sufficient funding to DHHL[.]" Nelson I, 127 Hawai‘i at 205, 277

P.3d at 299.

B. Proceedings Related to Nelson I

1. The 2007 First Amended Complaint

Plaintiffs' 2007 First Amended Complaint 5 sought

"redress for the failure of this State and agencies of the State

to live up to their solemn trust obligations pursuant to the

[HHCA] and Article XII § 1 of the Hawai‘i State Constitution."

Count 1 claimed in part that DHHL "does not currently

receive sufficient funds for . . . (4) the administration and

operating budget of the [DHHL.]" (Emphasis added.)

5 The 2007 First Amended Complaint included Counts 3 and 4, but the
parties stipulated to dismiss Count 3 without prejudice and Count 4 with
prejudice.

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Count 2, by realleging Count 1's allegations, claimed

in part that the "state administration fails to annually request

'sufficient sums' for the administration and operating budget of

the [DHHL] to assure that . . . all programs of the department

prescribed under Article XII, § 1 are adequately funded."

(Emphasis added.)

Plaintiffs sought a declaratory order, injunctive

relief, appointment of a special master, attorneys' fees and

costs, and other relief the circuit court deemed proper.

The State moved for summary judgment arguing "[a]ny

claim that the Hawai‘i Legislature has an obligation under

Article XII, Sections 1 & 2, of the [Hawai‘i] Constitution to

provide a certain level of money to DHHL is barred by the

Political Question Doctrine." 6 (Formatting altered.) The

circuit court granted the State's motion.

Plaintiffs appealed.

2. Intermediate Court of Appeals' (ICA) Decision (2011)

In order to decide "whether the 1978 constitutional

amendment requiring sufficient funding of DHHL [was] a political

question," this court applied the six-factor test in Trustees of

the Office of Hawaiian Affairs v. Yamasaki, 69 Haw. 154, 737

6 The political question "doctrine is the result of the balance courts
must strike in preserving separation of powers yet providing a check upon the
other two branches of government." Nelson I, 127 Hawai‘i at 194, 277 P.3d at
288.

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P.2d 446 (1987), "to the intent of the delegates to the 1978

Constitutional Convention." Nelson v. Hawaiian Homes Comm'n

(Nelson), 124 Hawai‘i 437, 442, 444, 246 P.3d 369, 374, 376

(App. 2011).

Ultimately, this court concluded that none of the six

factors indicating a political question were present and the

"question of the legislature making sufficient sums available to

the DHHL is justiciable and therefore not a political question."

Id. at 447, 246 P.3d at 379.

This court then vacated the circuit court's final

judgment and remanded the case for further proceedings. Id.

The State filed an application for a writ of

certiorari.

3. Nelson I (2012) - Hawai‘i Supreme Court's Decision
Regarding the Political Question Doctrine

On certiorari, the supreme court affirmed this court's

judgment but only as to "what constitutes 'sufficient sums' for

DHHL's administrative and operating expenses[,]" not the other

three purposes. Nelson I, 127 Hawai‘i at 188, 206, 277 P.3d at

282, 300. In particular, the supreme court recounted the

delegates' detailed explanations "as to how administrative and

operating costs were allocated" and concluded that, "by the end

of the Committee on the Whole Debates, what was certain was that

the $1.3 to $1.6 [million] figure represented 'sufficient sums'

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for administrative and operating expenses only." Nelson I, 127

Hawai‘i at 200, 202–03, 277 P.3d at 294, 296–97.

As a result, the supreme court held that "the 1978

Constitutional Convention history does provide judicially

discoverable and manageable standards that do not involve

initial policy determinations of a kind clearly for nonjudicial

discretion." Nelson I, 127 Hawai‘i at 203, 277 P.3d at 297. "At

a minimum, funding at or above the $1.3 to $1.6 million

envisioned in 1978 would be required." Id. (footnote omitted).

But, the court explained, "this figure could be adjusted to

reflect the impact of factors such as inflation or increased

collective bargaining costs, both of which were acknowledged by

[a delegate] as factors that could appropriately be taken into

account in determining the required contribution." Nelson I,

127 Hawai‘i at 203 n.8, 277 P.3d at 297 n.8 (emphasis added).

In short, the supreme court affirmed this court's

judgment (which vacated the circuit court's judgment) "but only

on the narrower ground that the determination of what

constitutes 'sufficient sums' for administrative and operating

expenses under the Hawai‘i Constitution's Article XII, Section 1

[(adopting the HHCA)] is justiciable and not barred as a

political question." Nelson I, 127 Hawai‘i at 206, 277 P.3d at

300.

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In a footnote, the supreme court explained that only

Count 1 of the 2007 First Amended Complaint was at issue because

DHHL did not apply for a writ of certiorari as to Count 2.

Nelson I, 127 Hawai‘i at 191 n.4, 277 P.3d at 285 n.4. "As a

practical matter, however, the ICA's judgment vacated the entire

circuit court judgment and remanded the entire case for a

decision on the merits, which reopened all the Counts." Id.

C. Nelson II (2013) - Hawai‘i Supreme Court's Decision
Regarding Attorneys' Fees and Costs

Briefly, in Nelson II, the supreme court considered

whether Plaintiffs were entitled to an award of attorneys' fees

and costs pursuant to the private attorney general doctrine as

they prevailed in Nelson I. Nelson II, 130 Hawai‘i at 165, 307

P.3d at 145. Although the supreme court denied the request for

attorneys' fees (without prejudice), the supreme court clarified

that Plaintiffs prevailed in Nelson I because their claim(s)

against the State survived. Nelson II, 130 Hawai‘i at 166, 307

P.3d at 146.

D. Proceedings Related to Nelson III

1. On Remand to Circuit Court (2014-2016)

On remand, the circuit court held a bench trial on

Counts 1 and 2 of the 2007 First Amended Complaint. The circuit

court heard testimony from nine witnesses and received 239

exhibits into evidence.

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In its November 27, 2015 Findings of Fact, Conclusions

of Law, and Order, the circuit court found that the State

appropriated less funds than requested:

In each fiscal year since 1992, the State has
appropriated to DHHL less in general funds than what DHHL
requested to be appropriated for its administrative and
operating costs:

Amount Amount of General Funds
Requested: Appropriated:

1991-92: 5,111,453 4,278,706
1992-93: 5,079,006 3,850,727
1993-94: 5,569,607 3,251,162
1994-95: 5,609,683 3,251,162
1995-96: 6,178,421 2,565,951
1996-97: 6,222,903 1,569,838
1997-98: 6,944,784 1,493,016
1998-99: 7,710,784 1,347,684
1999-00: 7,120,905 1,298,554
2000-01: 7,120,905 1,298,554
2001-02: 7,373,104 1,359,546
2002-03: 7,373,104 1,196,452
2003-04: 8,890,352 1,297,007
2004-05: 8,947,595 1,277,007
2005-06: 9,129,838 817,559
2006-07: 9,129,838 1,067,559
2007-08: 10,966,821 1,169,174
2008-09: 11,522,092 883,669
2009-10: 19,603,754 0
2010-11: 19,603,754 0
2011-12: 20,122,220 0
2012-13: 20,122,220 0
2013-14: 25,727,315 9,632,000
2014-15: 27,122,825 9,632,000
2015-16: 28,478,966 9,632,000

And "between and including fiscal years 1992 and 2013," DHHL's

"own funding requests to the legislature were for less than DHHL

determined that it needed." The circuit court also found that

"[s]ince 1978, the legislature has not appropriated enough

general funds to pay for DHHL's administrative and operating

expense[s]."

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The circuit court then contemplated "DHHL's actual

administrative and operating budget expenses" and DHHL's

projections for then-current fiscal year 2015-2016. In total,

the court determined DHHL needed more than $28 million for its

fiscal year 2015-2016 administrative and operating budget.

In its "Order Amending Order Issued November 27,

2015[,]" the circuit court determined that "the amount of

general funds appropriated to DHHL for its administrative and

operating budget for fiscal year 2015-16 ($9,632,000) [was] not

sufficient."

The circuit court entered the May 31, 2016 First

Amended Final Judgment in favor of Plaintiffs and against the

State as to Count 1 and in favor of Plaintiffs and against DHHL

as to Count 2.

The State appealed, and Plaintiffs cross-appealed.

DHHL applied for transfer to the supreme court, which was

accepted.

2. Nelson III (2018) - Hawai‘i Supreme Court's Decision
Regarding Actual Needs

The supreme court vacated the circuit court's decision

because it exceeded Nelson I's mandate by determining DHHL's

actual need for its administrative and operating expenses.

Nelson III, 141 Hawai‘i at 413, 412 P.3d at 919.

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More specifically, the supreme court held "the circuit

court erred by engaging in a comprehensive inquiry into the

amount DHHL actually needed for its administrative and operating

expenses." Nelson III, 141 Hawai‘i at 412, 412 P.3d at 918.

Rather, "[u]nder Nelson I, the only judicially discoverable and

manageable standard for determining 'sufficient sums' for DHHL's

administrative and operating budget was established by the

delegates of the 1978 Constitutional Convention as $1.3 to 1.6

million, adjusted for inflation." Id. (citation omitted).

The supreme court announced in three different places

in its opinion that it vacated the circuit court's judgments and

underlying orders and remanded the case for further proceedings

and to determine sufficient sums for fiscal year 2015-2016:

• "we vacate the circuit court's First Amended
Final Judgment, Final Judgment, and underlying
orders, and remand this case to the circuit
court to determine the current value of $1.3 to
1.6 million (in 1978 dollars), adjusted for
inflation[,]" Id. at 413, 412 P.3d at 919;
• "we vacate the circuit court's First Amended
Final Judgment, Final Judgment, and underlying
orders. This case is remanded to the circuit
court for further proceedings. On remand, the
circuit court shall determine whether the State
Defendants have provided 'sufficient sums' for
DHHL's administrative and operating budget
using the only judicially discoverable and

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manageable standard identified in Nelson I:
the 1978 baseline of $1.3 to 1.6 million,
adjusted for inflation[,]" Id. at 422, 412 P.3d
at 928; and
• "the circuit court's First Amended Final
Judgment, Final Judgment, and underlying orders
are vacated, and this case is remanded to the
circuit court to determine whether the State
Defendants have provided 'sufficient sums' for
DHHL's administrative and operating budget for
the 2015-2016 fiscal year using the only
judicially discoverable and manageable standard
identified in Nelson I: the 1978 baseline of
$1.3 to 1.6 million, adjusted for inflation."
Id.

The supreme court then entered its judgment, vacating

the circuit court's judgments and underlying order and remanding

the case for further proceedings consistent with its opinion:

• "the Circuit Court of the First Circuit's
('circuit court') First Amended Final Judgment,
Final Judgment, and underlying order are
vacated, and the case is remanded to the
circuit court for further proceedings
consistent with the opinion."
E. Proceedings Related to This Appeal

1. Pre-Hearing Motions

On remand to the circuit court, the State moved for

summary judgment, which the circuit court denied. DHHL moved to

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set the inflation rate at eight percent annually, or

alternatively, to hold an evidentiary hearing; the circuit court

granted DHHL's motion to the extent it requested an evidentiary

hearing.

And Plaintiffs moved the court for "a final

determination to resolve count 1 of [P]laintiffs' Complaint

filed in 2007." Plaintiffs reiterated that their 2007 First

Amended Complaint "did not ask for a determination as to exactly

how much money would be sufficient for the Department[.]"

Instead, they "specifically asked for 'a Declaratory Order that

. . . [t]he State of Hawai‘i has failed to provide sufficient

funds to the Department . . . in violation of [its]

constitutional duty to do so[.]" (Emphasis omitted.)

The circuit court denied Plaintiffs' motion for a

determination as to Count 1. The circuit court explained it

understood Plaintiffs' "argument that Count 1 was never about a

single year and [that] this court should therefore determine and

add up amounts for the administrative and operating budgets for

all the years at issue and find that Plaintiffs prevailed[.]"

The circuit court, however, noted "the remand order specifically

direct[ed] [it] to determine the administrative and operating

budget for the 2015-2016 fiscal year by using the 1978 baseline

of $1.3 to $1.6 million, adjusted for inflation." The court

explained it was "first [going to] follow the remand order[,]"

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and the "form of any Final Judgment issued by [the] court

[would] be determined at the end of the remanded proceedings[.]"

2. Evidentiary Hearing

The evidentiary hearing focused on the inflation index

the circuit court should apply to adjust $1.3 to $1.6 million in

1978 dollars to 2015-2016 dollars.

Two threshold matters shaped the court's analysis.

First, the court distinguished "between inflation (price changes

over time for the same or similar goods and services) versus

growth of costs (adding services and employees over time

increases the budget baseline, which in turn changes over time

due to inflation)." Because the court understood Nelson III's

instruction as precluding "any evidence of cost increases above

the 1978 baseline(s) resulting from growth as opposed to

inflation[,]" it "focused on determining inflation based on the

same or similar costs, and not determining inflation to include

growth of goods and services."

Second, the court declined to "determine what

inflation rate or index the ConCon estimated and applied in 1978

and then apply it for the period 1978 to [fiscal year] 2016."

Although "the court agree[d] there is reason to believe the

ConCon was referring to the [Consumer Price Index or] CPI[,]" it

noted "the remand order does not require that only the CPI be

used to adjust for inflation from 1978 to FY 2016." Instead,

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the court interpreted its task as "a fact-based economics and

math exercise" in which it was to "make a factual determination

of what a 1978 budget actually costs in 2016 due to inflation"

using the best available tool. It said it was "not aware of any

applicable law precluding it from using all available and

admissible evidence to solve this exercise as accurately as

possible."

Over two days, the circuit court heard testimony from

three expert witnesses "in the field of economics, including how

to adjust for inflation." Although the experts generally agreed

"adjusting for inflation involves tracking changes in prices

over time[,]" they each testified to "different ways to adjust

for inflation."

First, the State's expert testified the U.S.

Department of Labor's Consumer Price Index was the best method

to adjust the 1978 baseline for inflation because it "is the

most widely used method to track inflation, particularly for

economic analysis and policy-making." The CPI "measures changes

in the prices of goods and services for consumers: namely, goods

and services bought and consumed by individuals, families, and

households." (Emphasis omitted.) The Honolulu CPI, for

example, tracks "categories includ[ing] food, cars, gas,

housing, furniture, medical costs, education, travel,

electricity, and other consumer-oriented items." Moreover, the

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State inferred that the "excerpts from the 1978 Constitutional

Convention which referred to an 8% inflation" may have been

referring to the CPI because eight percent was "approximately

the inflation rate per the CPI then."

Next, the Department's expert testified the court

should apply the U.S. Bureau of Labor Statistics' Employment

Cost Index for State and Local Government (ECI) because it

"tracks the compensation of state and local government employees

over time" and DHHL's largest expense continues to be "personnel

costs, including salaries and fringe benefits."

Last, Plaintiffs' expert testified the court should

apply the State and Local Government Consumption Expenditures

Price Index (SLGC) which "tracks price changes for government

goods and services and specifically adjusts for increased costs

due to government growth" by separating "out these quantitative

effects of the increase in the size of government from any price

effects." "Unlike the ECI, the SLGC also includes moneys that

state and local governments spend for office equipment,

materials, supplies, and services, including salaries."

3. Findings and Conclusions

In its December 18, 2020 Findings of Fact, Conclusions

of Law, and Order, the circuit court found the SLGC was the

"better tool" to measure inflation. The court explained that

"the SLGC [was] better than a CPI (both U.S. and Honolulu)

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because . . . the two CPI indexes focus on consumer costs, which

simply do not reflect the costs of government agencies." It

also found "the SLGC [was] better than ECI, which [was] limited

to employee salaries and benefits."

Applying the SLGC index for inflation, the court

adopted $5,810,065.00 and $7,150,850.00 in fiscal year 2015-2016

dollars as the adjusted amounts for the 1978 baseline of $1.3

and $1.6 million, respectively.

It then found there was "no dispute that the

Legislature appropriated over $17 million in general funds for

DHHL's administrative and operating budget for fiscal year

2016[.]" In fact, the "actual appropriation of over $17 million

exceeds by far every expert opinion offered post-remand[.]" "No

matter which inflation index this court may have selected from

the experts and evidence presented, a single conclusion is

required: 'sufficient sums' were provided." 7

The court thus determined "that by appropriating over

$17 million for FY 2016, the State Defendants provided

'sufficient sums' for DHHL's administrative and operating budget

for the 2015-2016 fiscal year[.]"

7 We note the parties do not appeal from the circuit court's
determination that sufficient sums were provided for fiscal year 2015-2016.

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4. Plaintiffs' Motion for Summary Judgment

Plaintiffs moved for summary judgment as to Count 1,

arguing they were "entitled to summary judgment and a

declaratory order that the State of Hawai‘i failed to provide

sufficient funds to the [DHHL] in violation of its

constitutional duty to do so pursuant to Article XII § 1

[(adopting the HHCA)] of the state constitution." Plaintiffs

argued that "Count 1 was never confined to any one particular

year" and "certainly not to fiscal year 2016." Plaintiffs

pointed out that "[w]ithout even considering inflation, it is

obvious that the legislature failed to provide the [DHHL] with

sufficient sums in fiscal years 2000-2013."

5. Final Judgment

As to Count 1 of the 2007 First Amended Complaint, the

circuit court entered judgment in favor of the State and against

Plaintiffs based on its findings for fiscal year 2015-2016.

As to Count 2 of the 2007 First Amended Complaint, the

circuit court entered judgment in favor of DHHL and against

Plaintiffs based on its findings for fiscal year 2015-2016.

The circuit court elaborated on its judgment regarding

Counts 1 and 2 in its "Analysis and Conclusions Regarding Entry

of Final Judgment[.]" (Formatting altered.) As relevant to

this appeal, the court explained "[t]he only remaining issue in

this court's view [is] the prior years, before FY 2015-2016. On

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that issue, [the] court will practice strict abeyance to what it

concludes is the express limit of the remand instructions --

determine sufficient sums for one year, FY 2015-2016."

Then, in a minute order, the circuit court removed

Plaintiffs' Motion for Summary Judgment from the calendar

because it was "moot in light of the Final Judgment entered

5/25/21. Although the [motion] was filed before the Final

Judgment was entered, the court conclude[d] the issues presented

were fully aired in the previous filings and arguments[.]"

(Formatting altered.)

DHHL appealed, and Plaintiffs cross-appealed. The

parties did not apply to transfer this case to the supreme

court.

II. STANDARDS OF REVIEW

Appellate courts review findings of fact under the

clearly erroneous standard and conclusions of law under the

right/wrong standard. Kalima v. State, 148 Hawai‘i 129, 143, 468

P.3d 143, 157 (2020); Ching v. Case, 145 Hawai‘i 148, 165, 449

P.3d 1146, 1163 (2019). But conclusions of law presenting mixed

questions of fact and law are reviewed "under the clearly

erroneous standard because the court's conclusions are dependent

upon the facts and circumstances of each individual case." Chun

v. Bd. of Trs. of Emps.' Ret. Sys. of State of Hawai‘i, 106

Hawai‘i 416, 430, 106 P.3d 339, 353 (2005) (cleaned up).

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Interpretation of a court order is reviewed de novo.

State v. Guyton, 135 Hawai‘i 372, 377, 351 P.3d 1138, 1143

(2015).

III. DISCUSSION

On appeal, DHHL challenges the circuit court's

selection and application of the SLGC inflation index. 8 Both

DHHL and Plaintiffs challenge the circuit court's judgment in

favor of the State on Count 1. Plaintiffs additionally

challenge the circuit court's judgment in favor of DHHL on

Count 2. 9 Again, the circuit court did not err in selecting and

applying the SLGC index, but erred in entering judgment in favor

of the State on Count 1 and DHHL on Count 2 as pled in the 2007

First Amended Complaint.

8 DHHL also challenges the circuit court's failure to provide a
prospective method of calculating inflation. DHHL fails to point to where in
the record it brought this issue to the circuit court's attention and, thus,
this challenge is waived. See HRAP Rule 28(b)(4).

Even if this challenge was not waived, the 2007 First Amended Complaint
did not request, and the prior appellate dispositions did not direct, that
the circuit court set an inflation index for prospective use. Nelson, 124
Hawai‘i at 447, 246 P.3d at 379; Nelson I, 127 Hawai‘i at 206, 277 P.3d at
300; Nelson II, 130 Hawai‘i at 173-74, 307 P.3d at 153-54; Nelson III, 141
Hawai‘i at 422, 412 P.3d at 928. Thus, we cannot say that the circuit court
erred when it did not identify a particular inflation index to be used
prospectively.
9 Plaintiffs also challenge the circuit court's "effective[] den[ial]"
of their motion for summary judgment. Based on our decision, we need not
reach this issue.

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A. The Circuit Court Did Not Err in Selecting and Applying the
SLGC Index

On appeal, DHHL contends "the [c]ircuit [c]ourt erred

in concluding that the best inflation rate was the SLGC,

disregarding the words of the delegates at the 1978

Constitutional Convention and the legislature's authorization

for positions at the DHHL." 10 "Instead, the [c]ircuit [c]ourt

should have adopted the 8-percent inflation rate set by the

Delegates at the Debates or adopted the ECI and taken into

account the increase in DHHL's staff size."

DHHL relies on the following excerpt from the debate

to support its argument:

"From [the $1.3 million] budget, $750,000 goes
toward staff salaries for 66 percent of the
staff. Even this figure will rise as this
portion of the staff is civil service and subject
to an 8-percent annual inflation rate."

10 Appearing to challenge DHHL's standing, the State argues DHHL's
appeal should be dismissed as it "is confusingly attempting to appeal from
the judgment that the circuit court entered against Plaintiffs below" and
that "[t]here is no legitimate legal basis for DHHL's appeal because DHHL is
not a 'party aggrieved' by the judgment of a circuit court."

An aggrieved party is "one who is affected or prejudiced by the
appealable order." Leone v. Cnty. of Maui, 141 Hawai‘i 68, 89, 404 P.3d 1257,
1278 (2017) (citations and internal quotation marks omitted).

The circuit court's selection of an inflation index affects the
calculation of sufficient sums and, thus, affects DHHL's administrative and
operating budget. Montalvo v. Chang, 64 Haw. 345, 351, 641 P.2d 1321, 1326
(1982) (holding that, although the orders did not subject the State to
further liability, the State was aggrieved "since its interests may well be
jeopardized if the fees in question were improper") (overruled on other
grounds by Chun v. Bd. of Trs. of Emps.' Ret. Sys. of State of Hawai‘i, 92
Hawaiʻi 432, 992 P.2d 127 (2000)). We therefore address DHHL's point of
error.

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Debates in the Committee of the Whole on Hawaiian Affairs Comm.

Prop. No. 11, in 2 Proceedings, at 414.

This excerpt does not support the proposition that the

delegates set an inflation rate at eight percent for the entire

administrative and operating budget. The "8-percent annual

inflation rate" referenced only a portion of the $1.3 million

budget - the civil servant salaries. And the debates did not

explain why civil servant salaries would be subject to an eight

percent annual increase – by, for example, citing to a

collective bargaining agreement – or tether the eight percent to

any identifiable index.

In the alternative, DHHL contends that, "[i]f the

[c]ircuit [c]ourt did not err in refusing to adopt the 8-percent

inflation rate discussed in the Debates," the court should have

applied the ECI.

Because "[t]here is no universally agreed formula to

apply to all inflation adjustments[,]" the circuit court

reviewed each proposed inflation adjustment method and made

"findings as to which method the court decided to apply in this

case, and why." The circuit court found that the SLGC index was

the "better tool" to adjust for inflation because it "tracks how

the average price of goods, services, and labor purchased by a

government agency changes" and "tracks inflation for a

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government agency's major costs of employee salaries and

benefits as well as other government agency administrative and

operating costs." (Internal quotation marks omitted.)

Substantial evidence in the form of expert witness testimony

supports the circuit court's finding. See Leslie v. Est. of

Tavares, 91 Hawai‘i 394, 399, 984 P.2d 1220, 1225 (1999)

(explaining findings are "clearly erroneous when 'the record

lacks substantial evidence to support the finding'" (citations

omitted)).

Thus, the circuit court's finding that the SLGC was a

"better tool" than the ECI or CPI to adjust the 1978 budget

baselines for inflation was not clearly erroneous, and the

circuit court did not err in selecting and applying the SLGC

inflation index.

B. The Circuit Court Erred by Not Resolving Counts 1 and 2 as
Pled in the 2007 First Amended Complaint

Next, Plaintiffs and DHHL challenge the circuit

court's entry of judgment on Count 1 of the 2007 First Amended

Complaint in favor of the State and against Plaintiffs based on

its fiscal year 2015-2016 findings. 11 Plaintiffs additionally

11 The State again appears to challenge DHHL's standing to appeal,
arguing that "DHHL appears to be improperly stepping into Plaintiffs' shoes"
and that "DHHL is a stranger to Count 1 - there are no claims against DHHL
under Count 1[.]"

Count 1 required a determination as to whether the State provided
sufficient sums to DHHL, which affects DHHL's administrative and operating
budget. See supra note 10 and accompanying text. In any event, Plaintiffs
raise the same issue.

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challenge the circuit court's judgment in favor of DHHL on

Count 2.

To resolve these challenges, we must first interpret

Nelson III's instructions to the circuit court.

1. Nelson III's Instructions

"When a reviewing court remands a matter with specific

instructions, the trial court is powerless to undertake any

proceedings beyond those specified therein." Standard Mgmt.,

Inc. v. Kekona, 99 Hawai‘i 125, 137, 53 P.3d 264, 276 (App. 2001)

(citation omitted). But "[t]he 'true intent and meaning' of a

reviewing court's mandate is not to be found in a solitary word

or decontextualized phrase, but rather in the opinion, as a

whole, read in conjunction with the judgment and interpreted in

light of the case's procedural history and context." In re

Hawai‘i Elec. Light Co., 149 Hawaiʻi 239, 241, 487 P.3d 708, 710

(2021).

In Nelson III, the Hawai‘i Supreme Court vacated the

circuit court's judgments and underlying orders, reopening

Counts 1 and 2 of the 2007 First Amended Complaint. Nelson III,

141 Hawai‘i at 422, 412 P.3d at 928; see Nelson I, 127 Hawai‘i at

191 n.4, 277 P.3d at 285 n.4 (explaining that, although the

circuit court's decision as to Count 2 was not appealed, the ICA

"remanded the entire case for a decision on the merits, which

reopened all the Counts").

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In addition, the supreme court remanded the case to

the circuit court "for further proceedings" and "to determine

whether the State Defendants have provided 'sufficient sums' for

DHHL's administrative and operating budget for the 2015-2016

fiscal year using the only judicially discoverable and

manageable standard identified in Nelson I: the 1978 baseline of

$1.3 to 1.6 million, adjusted for inflation." Nelson III, 141

Hawai‘i at 422, 412 P.3d at 928.

Based on Nelson III's opinion and judgment and this

case's procedural history, the circuit court's task was twofold

- it was required to (1) determine the sufficient sums question

for fiscal year 2015-2016 and (2) resolve Counts 1 and 2 of the

2007 First Amended Complaint. Nelson III, 141 Hawai‘i at 422,

412 P.3d at 928; see Nelson I, 127 Hawai‘i at 191 n.4, 277 P.3d

at 285 n.4. To interpret Nelson III otherwise would leave

undecided Plaintiff's claims as pled in the 2007 First Amended

Complaint.

Thus, the circuit court erred by narrowly interpreting

Nelson III's mandate.

Because Counts 1 and 2 were reopened, we look at the

2007 First Amended Complaint to determine the scope of

Plaintiffs' claims.

"Hawaii's rules of notice pleading require that a

complaint set forth a short and plain statement of the claim

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that provides defendant with fair notice of what the plaintiff's

claim is and the grounds upon which the claim rests. Pleadings

must be construed liberally." Adams v. Dole Food Co., 132

Hawaiʻi 478, 488, 323 P.3d 122, 132 (App. 2014) (cleaned up).

To satisfy Hawai‘i Rule[s] of Civil Procedure [Rule]
8(a)(1), "the complaint must contain either direct
allegations on every material point necessary to sustain a
recovery on any legal theory, even though it may not be the
theory suggested or intended by the pleader, or contain
allegations from which an inference fairly may be drawn
that evidence on these material points will be introduced
at trial."

Kawakami v. Kahala Hotel Invs., LLC, 142 Hawaiʻi 507, 517, 421

P.3d 1277, 1287 (2018) (cleaned up).

2. Resolution of Count 1

Count 1 of the 2007 First Amended Complaint alleged

the State violated its constitutional duty to sufficiently fund

DHHL. Although Count 1 broadly addressed all of HHCA's

purposes, the supreme court in Nelson I narrowed the scope of

what the circuit court could address to DHHL's administrative

and operating expenses. 127 Hawai‘i at 203, 206, 277 P.3d at

297, 300.

Though Plaintiffs argue their 2007 First Amended

Complaint "was not focused on a single fiscal year[,]" Count 1

alleged that DHHL "does not currently receive sufficient funds

for . . . the administration and operating budget[.]" (Some

emphasis added.) Even when liberally construing the complaint

and considering the factual allegations raised, Count 1's use of

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"currently" indicates reference to the year the First Amended

Complaint was filed - 2007, which could encompass fiscal years

2006-2007 and 2007-2008. See Adams, 132 Hawaiʻi at 488-89, 323

P.3d at 132-33 (explaining all pleadings must be "construed

liberally" so "as to do substantial justice" (citations and

internal quotation marks omitted)).

Here, the circuit court entered its May 25, 2021 Final

Judgment in favor of the State and against Plaintiffs on Count 1

of the 2007 First Amended Complaint based on its finding of

sufficient sums in fiscal year 2015-2016. The circuit court

made no findings regarding the amounts the legislature allocated

to DHHL's administrative and operating budget as related to

2007. The circuit court also made no findings as to the value

of $1.3 and $1.6 million 1978 dollars adjusted for inflation to

2007 dollars. Absent these findings, the circuit court could

not render a judgment on Count 1 as pled in the 2007 First

Amended Complaint.

Thus, the circuit court erred in entering judgment in

favor of the State and against Plaintiffs on Count 1 of the 2007

First Amended Complaint by relying on its findings for fiscal

year 2015-2016.

3. Resolution of Count 2

Count 2 of the 2007 First Amended Complaint realleged

and incorporated all allegations preceding it, which included an

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allegation that the State "administration fails to annually

request 'sufficient sums' for the administration and operating

budget of the [DHHL] to assure that . . . all programs of the

department prescribed under Article XII, § 1 are adequately

funded." (Emphasis added.)

The circuit court made no findings regarding the

amount of funding DHHL requested annually for its administrative

and operating budget prior to the filing of the 2007 First

Amended Complaint (or for fiscal year 2015-2016). Without

findings as to the amount of funding DHHL requested, the circuit

court could not render judgment on Count 2 as pled in the 2007

First Amended Complaint.

Thus, the circuit court erred in entering judgment in

favor of DHHL and against Plaintiffs on Count 2 of the 2007

First Amended Complaint by relying on its findings for fiscal

year 2015-2016.

IV. CONCLUSION

Based on the foregoing, to the extent the circuit

court made determinations regarding Counts 1 and 2 of the 2007

First Amended Complaint based solely on its fiscal year 2015-

2016 findings, we vacate those portions of the circuit court's

May 25, 2021 Final Judgment and December 18, 2020 Findings of

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Fact, Conclusions of Law, and Order; we otherwise affirm. We

remand this case to the circuit court for further proceedings

consistent with this opinion.

Melvyn M. Miyagi, /s/ Keith K. Hiraoka
John E. Dubiel, Presiding Judge
(Watanabe Ing),
for Defendants- /s/ Karen T. Nakasone
Appellants/Cross Appellees. Associate Judge

David Kimo Frankel /s/ Sonja M.P. McCullen
and Associate Judge
David Kauila Kopper,
Kirsha K.M. Durante,
(Native Hawaiian Legal
Corporation),
for Plaintiffs-
Appellees/Cross-Appellants.

Kimberly T. Guidry,
Solicitor General,
Kalikoʻonālani D. Fernandes,
Deputy Solicitor General,
for Defendants-Appellees/
Cross-Appellees.

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