HAWSCT Defines "Contested Case" Broadly, Reviews Autoapproval Statute

In a decision that at first blush seems to have little to do with land use law, the Hawaii Supreme Court reiterated the standard for when an agency hearing is a "contested case" under the Administrative Procedures Act, and clarified what constitutes agency "action" for purpose of the permit application autoapproval statute.

Contested Case Broadly Defined

The first issue in E & J Lounge Operating Co. v. Liquor Comm'n of the City & County of Honolulu, No. 27940 (July 29, 2008) was whether, as the caption of the case indicates, a public hearing before the Honolulu Liquor Commission was a contested case under Haw. Rev. Stat. § 91-1(5).  The court held it was.

This case is important for land use law since many of the public hearings before agencies are not formally defined as contested cases.  The court held that the designation did not matter, and an agency hearing is a contested case, and subject to judicial review under chapter 91 when:

• the hearing is an agency hearing required by law, and

• the hearing determines the rights, duties, or privileges of specific parties.

Slip op. at 16 (citing Public Access Shoreline Hawaii v. Hawaii County Planning Comm'n, 79 Haw. 425, 903 P.2d 1246 (1995)).  Applying that standard, the court held that a hearing is "required by law" when it is required by rule, statute, or the constitution.

The Intermediate Court of Appeals decision, in contrast, held that a contested case was a quasi-adjudicatory agency hearing, and differed greatly from a quasi-legislative public agency hearing.  Contested cases are like trials, while other public hearings are like legislative hearings.  The Supreme Court rejected the distinction, holding that the statutory definition of contested case does not require that the hearing be like a trial.  See slip op. at 23-25.  The court also held that a hearing does not need to be labeled a "contested case" in order for the statutory definition to apply.  Slip op. at 27-28.

This decision reaffirms the need for vigilance because under Haw. Rev. Stat. § 91-14, a person aggrieved by an agency decision in a contested case has a fairly short time in which to seek judicial review. 

Autoapproval Statute

The Supreme Court also held that under the automatic approval statute, Haw. Rev. Stat. § 91‑13.5, an agency must act to grant or deny a permit application within a certain time period, but is not required to make a "legally effective" decision, at least procedurally.  Slip op. at 64-65.  Section 91-13.5 requires agency "take action to grant or deny" applications within certain time frames, or they are "deemed approved" --

(c)  All such issuing agencies shall take action to grant or deny any application for a business or development-related permit, license, or approval within the established maximum period of time, or the application shall be deemed approved ...

In the E & J Lounge case, one member of the Liquor Commission was not present at the first meeting of the agency, and the agency did not comply with section 91-11.  Thus, when the Commission denied the permit applications, the denial was "legally ineffective."  The applicant asserted that because the agency had not properly denied the application within the time limits, it was deemed approved.  The court disagreed, holding that a mere procedural error would not result in automatic approval.  It was enough that the agency purported to act, and seemed to be proceeding in good faith, with no party claiming that the error deprived the agency of the power to act.  Slip op. at 64-65.

This decision should be applied with caution, however, since it does not give agencies blanket license to disapprove applications and thereby beat an autoapproval deadline.  It would presumably be a different case, for example, if an agency's denial was not the consequence of a good faith -- but mistaken -- belief that it had the power to act, if the procedural error deprived it of jurisdiction, or if an application is denied because the agency has run out of time.  The court made no ruling on those situations, which were not presented by the facts of the case.