Trending
A 2nd Circuit jury found in favor of Maui County on Tuesday in a lawsuit in which California venture capitalist Douglas Leone and his wife, Patricia, alleged that county officials effectively took their Palauea Beach property as a public park without paying just compensation.
After a five-week trial, the verdict came within about two hours of the end of closing arguments early Tuesday afternoon.
Honolulu attorney Andrew Beaman said the plaintiffs were disappointed with the jury’s decision and planned to ask 2nd Circuit Judge Peter Cahill to set aside the verdict and find in favor of the plaintiffs during a July 17 hearing. If that motion is denied, the plaintiffs plan to appeal, he said.
He said evidence showed that Maui County had a regulatory scheme to take the Leones’ property without compensation and turn it into a public park. All the Leones wanted to do was build a single-family home, he said.
Department of Planning Deputy Director Michele Chouteau McLean said: “We felt very confident about our case, and we’re pleased the jury agreed with us.
“Our defense was based on evidence and based on common sense,” she said. “The evidence showed there was potentially other uses (for the property), and the Leones didn’t pursue any of those other uses.”
And, it’s “common sense that oceanfront property at Palauea isn’t valueless, as the plaintiffs claimed,” she said.
County Planning Director Will Spence said he was “very happy with the jury’s verdict,” but he wouldn’t be surprised if the plaintiffs file an appeal.
Maui County Deputy Corporation Counsel Brian Bilberry added that “the county believes the jury was well informed as to the underlying facts and the law applicable to this case. . . . We do not believe there is any further issue for appeal, and it is not the county’s intention to pursue this matter further on an appeal.”
The litigation stems from the Leones’ purchase in February 2000 of 20,343 square feet of oceanfront property at Palauea Beach for about $3.5 million. According to court filings, the property at 4492 Makena Keoneoio Road is one of several Palauea Beach lots, a number of which were developed into single-family residences.
In 1998, the Maui County Council designated the Palauea lots as “park” in the Kihei-Makena Community Plan. The properties are zoned, however, “hotel-multifamily.” The zoning permits single-family residences, but the community plan designation of “park” does not.
The beach lots also are in the special management area, which was created under the Hawaii Coastal Zone Management Act with strict land-use controls to protect valuable shoreline and coastal areas. The act imposes strict permit requirements for “developments” within SMA areas, but the term “developments” excludes single-family homes, unless the county finds that proposed construction may have a cumulative or a significant environmental or ecological effect on the special management area, according to an Intermediate Court of Appeals ruling in the case.
Maui County allows landowners to seek a determination of whether their proposed use is a “development” under state SMA law. If an application cannot be processed because the proposed project is inconsistent with the county general plan, community plan and zoning, it does not meet the development standard unless an amendment is being sought concurrently to address the inconsistency.
The plaintiffs maintain that their plans to build a home were not a “development” under SMA rules. And, in September 2007, they submitted an SMA assessment application for their Palauea property.
Then county Planning Director Jeff Hunt ruled a month later that the Planning Department could not process a permit for the Leones because their plans to build a home were inconsistent with the property’s community plan designation of “park.”
The Leones’ attorneys filed a lawsuit in November 2007, maintaining that “any available appeal or further administrative action . . . would be futile.”
Even though a single-family residence is not a “development” under SMA law, the rejection letter meant that the Leones could not proceed with their plans, their attorneys said. “Plaintiffs are left with no economically viable use for the property,” their lawsuit said.
It maintained that the county had taken the property for public use through “inverse condemnation,” with no compensation paid to the Leones. (“Inverse condemnation” refers to private property that has been taken by the government for public use without it exercising the power of eminent domain.)
“Plaintiffs are entitled to compensation in an amount equal to the fair market value of the property, . . . which in no event is less than $10 million,” their lawsuit said.
During the civil trial, the estimated value of their property ranged from about $8 million to $12.5 million, Beaman and McLean said.
In their original lawsuit, the plaintiffs sought $50 million in punitive damages from the county, although Beaman made no mention of punitive damages during his closing argument.
Earlier, Maui County filed a motion to dismiss the case because the plaintiffs had not exhausted available administrative remedies, and the Circuit Court agreed, dismissing the case for that reason. The Leones could have appealed the planning director’s decision to the Maui Planning Commission; could have waived the assessment procedure and submitted an SMA permit application; or sought an amendment to the Kihei-Makena Community Plan to change their lot’s designation from “park” to residential.
The Leones appealed to the state Intermediate Court of Appeals, which ruled in their favor and sent the case back to the 2nd Circuit Court for a trial. In its ruling, the appeals court cited a case in which land-use regulations can go “too far” and “thus reduce the use of the property to such an extent that it constitutes a ‘regulatory taking,’ requiring just compensation” under the U.S. Constitution.
There are two types of regulatory takings, the appeals court said. One is when regulations compel the property owner to “suffer a physical ‘invasion’ of his property . . . no matter how minute the intrusion” and when a regulation “denies all economically beneficial or productive use of land.”
The appeals court ruled that Hunt’s determination on the inconsistency of the Leones’ home-building plans and the property’s “park” designation was a final decision because it set forth a “definitive position regarding how Maui County will apply the regulations at issue to the particular land in question.”
According to www.Forbes.com, Leone, 57, of Atherton, Calif., is a managing partner at Sequoia Capital. The website says Leone is a self-made billionaire, with his wealth estimated at $2.1 billion as of May 1. Forbes says Leone ranks No. 297 among billionaires in the United States.
An article in the April 14, 2014, issue of Forbes, titled “Inside Sequoia Capital: Silicon Valley’s Innovation Factory,” features Leone, an immigrant from Italy, as an executive with Sequoia Capital, called “Silicon Valley’s capital of capital.” It says that Sequoia’s “children” include Apple, Oracle, Cisco, Yahoo, Google and LinkedIn.
“Since its founding in 1972, Sequoia has backed startups that now command a staggering $1.4 trillion in combined stock market value, equivalent to 22 percent of Nasdaq,” the article says.
* Brian Perry can be reached at bperry@mauinews.com.