Yesterday, the HAWSCT issued a unanimous opinion (authored by Chief Justice Recktenwald) in Kealoha v. Machado, SCAP-11-0001103, in a case involving the issue of whether the Office of Hawaiian Affairs (OHA) improperly expended trust funds on Hawaiians rather than on Native Hawaiians as that term is defined under the Hawaiian Homes Commission Act (HHCA).
In the underlying case, the Plaintiffs argued that under the Act, OHA may only expend trust funds “solely” in the interest of Native Hawaiians. Specifically, the plaintiffs claimed that OHA expended trust funds without regard to the blood quantum requirement of the HHCA. The differentiation between Hawaiians and Native Hawaiians is one of degree. Hawaiians are defined under state statute as anyone of Hawaiian ancestry; however, the HHCA defines “native Hawaiian” as “any descendant of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778.” The circuit court dismissed the complaint for failure to state a claim, and also denied the plaintiffs’ motion to amend the complaint.
The HAWSCT affirmed, holding that the plaintiffs’ complaint failed to state a claim. According to the court, the legislative history and treatment of the statute shows that “lawmakers did not view the term ‘solely’ to be significant in describing OHA’s expenditures of the pro rata portion of the public land trust.” Slip. Op. at 34-35.
The court also explained that OHA does not breach its fiduciary trust duty if “an expenditure . . . betters the conditions of native Hawaiians [but] also simultaneously benefit[s] the conditions of others.” Slip. Op. at 38. Moreover, according to the court, OHA has discretion on how to expend trust funds to better the condition of native Hawaiians. Regardless, the Plaintiffs’ failure to plead any such breach supported the circuit court’s decision to dismiss the complaint. The HAWSCT explained that the complaint was missing key allegations including any claim “that the OHA trustees’ spending decisions were made for any purpose other than benefiting native Hawaiians,” “that the expenditures were in conflict with or adverse to the interests of native Hawaiians,” or “that the expenditures were in furtherance of programs that do not benefit native Hawaiians.” Slip. Op. 40-41.
The HAWSCT also held that the circuit court did not abuse its discretion in refusing to allow the Plaintiffs to amend their complaint because the amended complaint similarly failed to state a claim.
The court’s full opinion is available here.