Federal Court Dismisses Maui Vacation Rental Due Process Claims -- Details

The US District Court for the District of Hawaii dismissed most of the counts of the Maui Vacation Rental Association's complaint against the County of Maui.  The court held that MVRA had the right to bring suit on behalf of its members, but dismissed -- without leave to amend -- the substantive and procedural due process claims, the breach of contract claim, the breach of implied covenant of good faith and fair dealing claim, the equitable estoppel claim, and the illegal customs and policies claim.  The court also dismissed the equal protection claim, but allowed MVRA to amend its complaint. 

Here's the court's written order.  (The court's summary order also mentioned a "First Amendment" claim, but no such claim is mentioned in the written order.)

County Fails to Process 90% of Applications

Vacation rentals outside of the "Hotel" zones are generally prohibited.  Those vacation rentals that were not operating on their zoning lot before the prohibition must seek a permit from the County.  The County, however, has a huge backlog of permit applications, some stretching back for years, and the court noted that of the 80 applications for permits, only 8 have been granted, and up to 70 were never even processed by the County.  The County also advised property owners that they should not bother to apply for permits since new regulations were in the works. 

County's Nonenforcement Assurances

These new regulations were chimerical and never materialized, but for years the County had an official policy of not enforcing the ban.  In 2001, that policy culminated in a written agreement with MVRA, signed by the County's Planning Director, stating, among other things, that the County would not seek to enforce the prohibition against those who had filed permit applications, and agreeing they could continue to operate while their applications were under County's consideration.  The Planning Director also agreed that for those who did not file applications, the County would not actively seek out violators, but would only react to complaints by third parties.

"Sorry, We Changed Our Mind"

But after a new administration (and new Planning Director) took office, the County said in effect, "we changed our mind."  In July 2007, the County that all unpermitted vacation rentals -- even those who had filed an application -- would be shut down on January 1, 2008.  No exceptions. MVRA then sued the County in federal court seeking declaratory and injunctive relief preventing Maui from shutting down unpermitted vacation rentals.   

• MVRA's Complaint 
• County of Maui's motion to dismiss
• MVRA's memorandum in opposition
• MVRA's supplemental brief in opposition
• County of Maui's supplemental brief in support of motion to dismiss

More background on the lawsuit here, here (video), and here.   

Court: No Permit, No Property, No Rights

The court held that the plaintiff did not possess a property interest protected from arbitrary and capricious government action because the County's laws did not require it to issue vacation rental permits.  The court relied on the word "may," in the ordinances, holding that because the County could not be compelled to issue the permits, it had unfettered discretion to deny them:

The County maintains full discretion in determining whether to grant conditional permits and special use permits.  A conditional permit may be recommended ... [c]onditional use permits may be issued subject to such terms and conditions deemed reasonable and necessary...

Slip op. at 27 (emphasis original).  While that analysis has never made a lot of sense (shouldn't the Due Process Clause require, as a normative matter, that government not behave arbitrarily and capriciously?), a District Court can't rewrite circuit law, and the Ninth Circuit generally requires that a life, liberty, or property interest be at stake in substantive due process claims.  See, e.g., Action Apartment Ass'n v. City of Santa Monica, No. 05-56533 (9th Cir. Dec. 3, 2007).

The court, however, missed the critical property interest at stake in the case.  It was not the unissued vacation rental permits.  Rather, the property interest possessed by the plaintiff was the County's 2001 assurances it would not enforce the vacation rental prohibition, because when the government makes assurances upon which people rely, those promises are property protected from arbitrarily and capricious backpedaling:

the consent of individual officials representing the United States cannot "estop" the United States ... it can lead to the fruition of a number of expectancies embodied in the concept of "property" expectancies that, if sufficiently important, the Government must condemn and pay for before it takes over the management of the landowner's property.

Kaiser Aetna v. United States, 444 U.S. 164, 179 (1979).  It appears the court incorrectly focused on the vacation rental permits as being the only possible "property" interest at stake in the case.

Comments

[Shareen Seykota]

I have many clients that want to own a home here and be here part of the year and rent their property out for the rest of the time until they retire.

I have other clients that want, privacy and want a Wedding or Family reunion and want a home rather than a Hotel.

I help clients create retreat and wellness or Yoga centers. Now they're all gone!!
My son who is a Caterer has lost all his business for the next 2 years.

This is crazy!! What is the solution?
We need a community plan that includes a "Retreat Center Category" not just, Vacation or short term rentals, and a Wedding site category or acceptable Zoneing in Homes with Oceanfront or Ocean Views, especially in the Agricultural areas where there is plenty of room for parking and space for the gathering.

Many Blessings for the Solutions to come and the Magic to happen in the New Year.
"Where two or more are gathered and spirits allign, Magic will happen!!"

Shareen A. Seykota, Realtor
Broker/Owner of Oceanfrontmaui.com