Hawaii Bar Journal - August 2021

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BAR JOURNAL A N O FFICIAL P UBLICATION

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H AWAII S TATE BAR A SSOCIATION AUGUST 2021 $5.00

TABLE O F C ON TE NTS VO LUM E 25 , N U M B E R 8

ARTICLES

EDITOR IN CHIEF Carol K. Muranaka BOARD OF EDITORS Christine Daleiden Susan Gochros Ryan Hamaguchi Cynthia Johiro Edward Kemper Laurel Loo Melvin M.M. Masuda Eaton O'Neill Lennes Omuro Brett Tobin

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President-Elect Shannon Sheldon Vice President Rhonda Griswold Secretary Russ Awakuni Treasurer Alika Piper YLD OFFICERS President Christopher St. Sure Vice President/President-Elect Jasmine Wong Secretary Nelisa Asato Treasurer Leo Shimizu

Contingent or Success Fees in Transactional Matters: Ethical Considerations and Risks

by Lennes N. Omuro

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OF NOTE

HSBA OFFICERS President Levi Hookano

Restoring – and Preserving – the Public’s Trust in Government

by Daniel M. Gluck

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HSBA Happenings

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Court Briefs

22

Case Notes

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Classifieds

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EXECUTIVE DIRECTOR Patricia Mau-Shimizu GRASS SHACK PRODUCTIONS Publisher Brett Pruitt Art Direction Debra Castro Production Beryl Bloom

Hawaii Bar Journal is published monthly with an additional issue in the fourth quarter of each year for the Hawaii State Bar Association by Grass Shack Productions, 1111 Nuuanu Ave., Suite 212, Honolulu, Hawaii 96817. Annual subscription rate is $50.

Periodical postage paid at Honolulu, Hawaii and additional mailing offices. POSTMASTER: Send address changes to the Hawaii Bar Journal (ISSN 1063-1585), 1100 Alakea St., Ste. 1000, Honolulu, Hawaii 96813.

Advertising inquiries should be directed to: Grass Shack Productions (808)521-1929 FAX: (808)521-6931 brett@grassshack.net

On the cover: Detail from Kimono, 30”x 24,” oil on canvas, by Victor Gao. Originally from China, Victor Gao’s gifted impressionist style creates a magnificent scene while nurturing the spirit within it to share his vision of paradise. Victor’s paintings have been selected for many Hawaii, North American and Chinese art exhibitions and are widely collected by art connoisseurs around the world.

To see more of his work visit Cedar Street Galleries in Honolulu.

Notices and articles should be sent to Edward C. Kemper at edracers@aol.com, Cynthia M. Johiro at cynthia.m.johiro@hawaii.gov, or Carol K. Muranaka at carol.k.muranaka@gmail.com. All submitted articles should be of significance to and of interest or concern to members of the Hawaii legal community. The Hawaii Bar Journal reserves the right to edit or not publish submitted material. Statements or expressions of opinion appearing herein are those of the authors and not necessarily the views of the publisher, editorial staff, or officials of the Hawaii State Bar Association. Publication of advertising herein does not imply endorsement of any product, service, or opinion advertised. The HSBA and the publisher disclaim any liability arising from reliance upon information contained herein. This publication is designed to provide general information only, with regard to the subject matter covered. It is not a substitute for legal, accounting, or other professional services or advice. This publication is intended for educational and informational purposes only. Nothing contained in this publication is to be considered as the rendering of legal advice.

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Restoring – and Preserving –

the Public’s Trust in Government

by Daniel M. Gluck

Hawaii’s account that “I public-sector will find some officials are enway of giving trusted to act in back to you guys the best interfor sure” and ests of the peo“I’ll be sure to ple of Hawai‘i. kick down some When they do specialties for not, the public’s you and your confidence in staff as compengovernment sation . . . .” declines. UnResolution of fortunately, and Investigation with good rea(“ROI”) 2017-1.1 son, the past few years have Representatives from Hawaii’s ethics agencies at a conference in the fall 2019.

• A state inspecnot improved tor, who was also a licensed real estate agent, conducted an the public’s trust in Hawaii’s government officials. Consider the on-site inspection of a care home and found multiple probfollowing examples: lems. The care home operator mentioned that she was renting the property but was interested in purchasing a property • A State of Hawai‘i harbor agent, responsible for issuing peron which to operate her care home. The state inspector/real mits, enforcing laws relating to ocean recreation, and making estate agent gave his private business card to the care home recommendations on harbor activities, used his State of operator and, thereafter, sent her dozens of e-mails with Hawai‘i e-mail account to e-mail a parasailing company he property listings. The inspector ended up representing the regulated as a harbor agent. He stated that he and his close care home operator’s mother-in-law in a real estate transaction, friends were interested in parasailing, and the company offered the harbor agent free rides for five people (valued at $238.45). earning a commission of $22,750 for his real estate brokerage The agent accepted the offer, responding via his state e-mail firm. ROI 2020-5.

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• A state supervisor falsified bid documents on forty-two different jobs by inserting “filler” bids – that is, information suggesting that there had been multiple competitive bidders for a project other than the intended contractor, when in fact no such bids were ever obtained. In total, the supervisor awarded nearly $1 million in contracts to that same intended contractor, and the contractor provided the supervisor with free use of yard equipment and free exercise classes for the supervisor’s son. Procurement documents raised questions as to whether work was indeed performed on every job, and for work that was performed, the evidence suggested that the State paid higher than market rates for the goods and services received. Resolution of Charge (“ROC”) 2018-4.

Helping to maintain the public’s trust in state government is the core mission of the Hawai‘i State Ethics Commission (“Commission”). As set forth in the Hawai‘i Constitution, article XIV, “[t]he people of Hawaii believe that public officers and employees must exhibit the highest standards of ethical conduct and that these standards come from the personal integrity of each individual in government.” The Commission is but one player in a network of public and private accountability agencies that includes city, state, and federal prosecutors, administrative agency employees, and non-profit “good government” organizations. For its part, the Commission has civil (but not criminal) authority over all state officers and employees, including legislators and volunteer board/commission members, but excluding justices and judges. Hawai‘i Revised Statutes (“HRS”) § 84-3. As such, for purposes of this article, all public officers and employees subject to the Commission’s jurisdiction (again, including legislators and volunteer board/commission members, but excluding justices and judges) will be referred to as “state officials.”

This article begins with an overview of the Commission’s jurisdiction and structure, followed by a description of the substantive ethics provisions applicable to state officials and examples of how those provisions have been applied in recent years.

This article concludes with brief descriptions of other government watchdog agencies in Hawai‘i, along with information

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regarding proactive steps the Commission is taking to restore and preserve the public’s trust in government.

I. The Commission A. Jurisdiction and Structure Article XIV of the Hawai‘i Constitution requires that the Legislature adopt an ethics code and establish an ethics commission for state officials; it also requires each political subdivision of the State to do the same. The Commission administers and enforces HRS chapter 84, the State Ethics Code for state officials, and the ethics agency for each county (namely, the Hawai‘i County Board of Ethics, the Honolulu Ethics Commission, the Kaua‘i County Board of Ethics, and the Maui County Board of Ethics) administers and enforces the ethics laws for its respective county officials. Similarly, the Commission administers and enforces HRS chapter 97, the Lobbyists Law (which requires lobbyists to register with the Commission and file periodic expenditure statements for state-level lobbying), and each county’s ethics agency administers and enforces lobbying reporting requirements for countylevel lobbying.

The Commission, established in 1968, was the first statewide ethics agency in the United States. The Commission has five volunteer commissioners, appointed by the governor for four-year terms. HRS §§ 84-21, 84-34. Interested candidates apply to the Judicial Council of the Hawai‘i Supreme Court (not to be confused with the Judicial Selection Commission), which in turn provides a list of two nominees to the Governor for each vacancy on the Commission. HRS § 84-21. The appointment does not require Senate confirmation. The Commission oversees ten staff including six attorneys, and the Commission’s employees serve at the pleasure of the Commission. HRS § 84-35.

B. Main Functions The Commission has four main functions: educating state officials regarding their ethics obligations; collecting and publishing disclosures (financial disclosures, gifts disclosures, lobbying

registration statements, and lobbying expenditure reports); providing ethics advice; and enforcing the Ethics Code.

1. Ethics Education The Commission is charged with educating state officials regarding ethics in government. HRS § 84-31(a)(7).

Commission staff offers live classes for state officials (currently via videoconference because of COVID-19), typically training more than 2,000 people a year.

The Commission’s general ethics training course covers each of the subject areas of the Ethics Code (discussed below), ending with a question-and-answer session with a Commission attorney. For those who cannot attend a live training session, the Commission has a web-based training module for new state officials and a separate web-based training module for new board/commission members.2 The Commission has various other resources to help educate state officials regarding their ethics obligations, including a series of “Quick Guides” on common ethics topics and a quarterly newsletter, all of which are available on the Commission’s website. Additionally, Commission staff offers free Continuing Legal Education courses for government attorneys. These courses have typically been approved as satisfying the ethics training requirement in Rule 22(b) of the Rules of the Supreme Court of Hawai‘i.

The Commission also offers multiple training sessions at the beginning of each legislative session for lobbyists to explain the registration and reporting requirements of the Lobbyists Law. Legislators, department directors and deputies, Office of Hawaiian Affairs trustees, and certain other high-level officials are required to take ethics training upon taking office. HRS §§ 84-41, 8442. For all other state officials, however, there is no statutory requirement to take ethics training, nor is there a requirement for any state official to repeat the initial mandatory training at periodic

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intervals.3 Nevertheless, the Commission holds trainings throughout the year (and, pre-COVID, across the State) that are open to all state officials, and agencies can request training for their staff and board/commission members.

2. Financial Disclosures, Gifts Disclosures, and Lobbying Reporting The Commission administers the filing requirements of the financial disclosure law, the gifts disclosure law, and the lobbyists law. Each of these disclosure laws helps to provide accountability and transparency in government.

The Ethics Code requires all elected state officials, as well as all candidates for state-wide elected office, to file financial disclosure statements that are available for public view. HRS § 84-17. Financial disclosures are also made public for department directors and deputies, members of some boards and commissions

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(including the Board of Regents, the Board of Education, the Ethics Commission, and the Public Utilities Commission), and certain other high-level state officials. In total, approximately 280 state officials file public financial disclosure statements, all of which are available on the Commission’s website.4 Approximately 1,600 other state officials are required to file confidential financial disclosure statements annually with the Commission.

The Ethics Code also requires state officials to file annual gifts disclosures for reportable gifts – that is, gifts valued at more than $200 (singly or in the aggregate) from a single source over the course of a year – if the source of the gift(s) has “interests that may be affected by official action or lack of action” by the official. HRS § 84-11.5. As discussed more fully below, many gifts to state officials are prohibited outright.

Some gifts are acceptable, however,

depending upon the circumstances. For example, state officials often receive offers of gifts of travel expenses to attend trainings or conferences outside of Hawai‘i, and the Commission’s attorneys frequently provide guidance to the would-be recipients as to whether the travel may be accepted (and if so, whether it must be reported on a gifts disclosure statement). The Commission receives and publishes approximately 150 to 200 gifts disclosure statements each year.

The Lobbyists Law, HRS chapter 97, requires lobbyists to file lobbying registration statements and periodic expenditure reports with the Commission, on behalf of themselves and their clients, disclosing all money spent in connection with lobbying.5 See HRS §§ 97-1, 97-2, 97-2.5, 97-3. Generally, unpaid community advocates and government officials (federal, state, and local) do not have to

register as lobbyists; instead, registration is typically only required for paid lobbyists or in-house employees who lobby.

HRS § 97-1. Each year, more than 400 individuals register as lobbyists on behalf of roughly 350-450 different organizations.6 The Lobbyists Law is primarily a disclosure statute, but it does prohibit contingent fee lobbying. HRS § 97-5.

In 2019, the Commission launched its new electronic filing system for lobbying registration and reporting. The new system allows lobbyists to register and file their periodic expenditure reports electronically and, more importantly, makes it easier for the public to view and search the data. In 2020, the Commission promulgated a new chapter of administrative rules providing additional clarity on reporting requirements for lobbyists. Hawai‘i Administrative Rules (“HAR”), title 21, chapter 10, available at https://ethics.hawaii.gov/adminrules/.

3. Advice One of the Commission’s essential functions is to provide timely and meaningful guidance on the Ethics Code and the Lobbyists Law. Each year, Commission staff attorneys respond to approximately 1,200 to 1,400 requests for advice from current, former, and prospective state officials, board and commission members, candidates for elective office, and lobbyists. When interpreting the Ethics Code and applying it to the requester’s specific situation, the Commission is mindful of the Legislature’s directive that “[t]his chapter shall be liberally construed to promote high standards of ethical conduct in state government.” HRS § 84-1.

At any time, the individual seeking advice may request a formal Advisory Opinion from the Commission itself.

After gathering the relevant facts, the Commission issues a written opinion to

the requester. The Commission then prepares a redacted version of that opinion for publication, removing all facts that could identify the requester. HRS § 84-31; HAR § 21-4-2. The Legislature intended that Advisory Opinions “be a source of reference for all persons concerned and contribute to a proper understanding of the code. These opinions should reflect the practical operation of the code and begin to develop a body of ‘case law’ on ethics.” Conf. Comm.

Rep. No. 16, in 1967 House Journal, at 856. More than 650 redacted Advisory Opinions are posted on the Commission’s website and are available on Westlaw.

4. Enforcement The Commission’s fourth main function is to enforce the Ethics Code and the Lobbyists Law. The Commission receives and reviews complaints,

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conducts confidential investigations concerning potential violations of the law, and, if appropriate, initiates formal charges against alleged violators.

Most complaints are lodged with the Commission informally. Complainants may call, e-mail, or otherwise notify Commission staff about potential misconduct, and complaints may be made anonymously. HAR § 21-5-2. Commission staff will determine whether the complaint is within the Commission’s jurisdiction and, if so, will investigate the allegations.7 If the complaint does not warrant further action, staff may close the matter. HAR § 21-5-2. By statute, proceedings at this stage are confidential. HAR § 21-5-2.2.

Alternatively, anyone can file a formal Charge – a written complaint, signed by the complainant under oath – directly with the Commission at any time (within the six-year statute of limitations for Ethics Code violations and the three-year statute of limitations for Lobbyists Law violations). Charges must be signed under oath and are not anonymous; there are penalties for false or frivolous charges. HRS §§ 84-31, 84-31.3; HAR § 21-5-2.1. The Commission itself can also issue a Charge, usually after an informal complaint is lodged and Commission staff has investigated the matter. HRS § 84-31.

The Commission is authorized to settle cases at any stage of enforcement proceedings. HRS § 84-39; HAR § 21-5-12.

Indeed, most cases in which there appears to be a violation are settled without a formal contested case hearing. The Commission’s resolution of the case, analogous to a judicial opinion, is nearly always published on the Commission’s website.8 Where the Commission and the respondent (the subject of the Charge) cannot reach an agreement and a majority of the Commissioners has determined that there is probable cause to believe a violation has occurred, the Commission will schedule the matter for a public contested case hearing to be conducted pursuant to HRS chapter 91. HRS § 84-31(c); HAR § 21-52.7. At this stage, the Charge is made public. HRS § 8431(c). The Commission’s staff attorneys are split into two groups: “Charge counsel,” who prosecute the alleged violation(s), and “Commission counsel,” who serve as legal advisers to the Commission. The Commission also issues an order erecting a “firewall” between Charge counsel and Commission counsel, prohibiting ex parte communications. HAR § 21-5-2.7.

The Commissioners hear the evidence, make findings of fact, and decide whether the alleged misconduct constitutes a violation of the Ethics Code or the Lobbyists Law. HRS § 8431; HAR § 21-5-7. If the Commission determines that the respondent has violated the Ethics Code, the Commission may impose administrative penalties of up to $1,000 per violation.

HRS § 84-39. The Commission may also refer the matter to the Department of the Attorney General (“Department”) to “recover any fee, compensation, gift, or profit received by any

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person as a result of a violation of the code of ethics by a legislator or employee[.]” HRS § 84-19(b). Additionally, the Attorney General may seek to void “any contract entered into by the State in violation of this chapter” or “[a]ny favorable state action obtained in violation of the code of ethics[.]” HRS §§ 84-16, 84-19. The Commission does not have the authority to suspend state officials or remove officials from their positions. At the conclusion of a contested case hearing, however, the Commission may issue a “complaint” to the relevant agency and the agency may take disciplinary action, including termination of the respondent. HRS §§ 84-32, 84-33. In rare cases, the Commission has negotiated agreements with respondents in which the respondent has agreed to resign as a condition of settlement.

II. Substantive Provisions of the State Ethics Code The Ethics Code, HRS chapter 84, contains substantive restrictions on gifts, abuse of position, unauthorized use/disclosure of confidential information, and conflicts of interests, as well as post-employment restrictions. Each of these areas is addressed in turn.

A. The Gifts Law (HRS § 84-11) and Gifts Reporting Law (HRS § 84-11.5) The gifts law prohibits state officials from soliciting, accepting, or receiving any gift, directly or indirectly, “under circumstances in which it can reasonably be inferred that the gift is intended to influence the legislator or employee in the performance of the legislator’s or employee’s official duties or is intended as a reward for any official action on the legislator’s or employee’s part.” HRS § 84-11. As such, the gifts law does not require proof of a quid pro quo; indeed, the existence of a quid pro quo may violate both state and federal criminal prohibitions. Rather, the Commission has stated that: The Gifts law is based on the appearance of improper influence or reward. The actual intent of the donor in giving a gift is irrelevant to determining whether the Gifts law is violated. Likewise, it does not matter whether the recipient of the gift is actually influenced by the gift. The Gifts law is violated where the facts and circumstances of the situation raise a reasonable inference of improper influence or reward.

Advisory Opinion (“AO”) 2018-2 at 3. Consider, for example, the following: the Chief Examiner of a state department, as part of his official state duties, negotiated a contract rate paid to a private vendor and monitored the vendor’s performance of its work. On four occasions, the Chief Examiner accepted meals from the vendor, totaling approximately $654. The bill

for one meal at Nobu Honolulu, attended by the Chief Examiner, his wife, and the vendor’s representative, was $500. The Chief Examiner claimed he did not know the cost of the meal but that he paid the vendor $100 in cash for the meal (though the vendor claimed that the Chief Examiner did not pay for any portion of the meal). The Commission issued a Charge against the Chief Examiner and thereafter settled the matter, with the Chief Examiner agreeing to pay an administrative penalty of $5,000.

ROC 2020-5.

The Commission generally considers three factors in determining whether a gift is acceptable: (1) the donor’s relationship to the recipient; (2) the value of the gift; and (3) the benefit to the State, if any, from the recipient’s acceptance of the gift. HAR § 21-7-2; AO 2019-7 at 4.

The relationship between the donor and the recipient is often the critical factor.

Just as a judge is generally prohibited from accepting gifts from litigants who appear before the judge, so too is a state official generally prohibited from accepting gifts from vendors, permittees, or others subject to the official’s regulatory authority.

As one might imagine, there are innumerable permutations of possible gifts. If a $500 dinner from a contractor is unacceptable, are there more modest gifts that could be accepted? May a state official accept a box of malasadas from a contractor? What about a single malasada? If a single malasada is acceptable but a dozen is not, then what is the right number of malasadas (and why is that the right number)? Consider a different scenario: a local developer seeks to invite a legislator to speak at its annual holiday party at a high-end restaurant and offers the legislator and the legislator’s spouse complimentary admission, valued at $250 per person (including food, alcohol, and entertainment). May the legislator accept? May the legislator’s spouse attend too? If this complimentary dinner is unacceptable,

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may the legislator accept a $10 bento from the developer? If so, can the developer’s lobbyist deliver $10 bentos to the legislator and all the legislator’s staff ? If so, how often?

There is not always a “right” answer as to whether a gift ought to be acceptable, but the Commission is nevertheless charged with drawing lines to determine whether they are legally permissible. To provide greater clarity, the Commission promulgated new administrative rules (which became effective in late 2020) stating that gifts are presumptively prohibited when the gifts come from certain kinds of donors. Specifically, the rule provides: Except as specifically provided in this chapter, a gift is generally prohibited where the recipient is in a position to take official action specifically affecting the donor, such as where the donor is a party to a contested case hearing before the recipient, regulated by the recipient or the recipient’s agency, involved in procurement with the recipient or the recipient’s agency, or a lobbyist seeking legislative or administrative action from the recipient or the recipient’s agency[.]

HAR § 21-7-2(b)(1). The Commission continues to use the three-factor test in most instances; however, as indicated above, the new administrative rule offers greater clarity in some instances by prohibiting all gifts where the recipient is in a position to take official action specifically affecting the donor.

A separate statute – the gifts reporting law, HRS § 84-11.5 – requires state officials to report gifts of over $200 from a single source (singly or in the aggregate) when “[t]he source of the gift or gifts have interests that may be affected by official action or lack of action by the legislator or employee,” with exceptions for things like inheritances and gifts from a spouse.

HRS § 84-11.5. As the Commission has stated: The Gifts Reporting law serves an important means of enabling the Commission and the general public to monitor the actions of public officials, which in turn promotes greater accountability and public confidence in government. Thus, under the Gifts Reporting law, a state

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employee has an affirmative obligation to disclose all gifts that fall within the reporting parameters regardless of whether the gifts were allowable.

ROC 2020-5 at 4. The Commission has recently resolved several cases involving the gifts and gifts reporting laws, including the following: • Two state supervisors accepted free labor from their subordinate employees for personal projects at the supervisors’ homes.

ROI 2019-3, ROI 2019-4.

• A state official accepted food items and other gifts from permittees, including free movie tickets to the premier of a movie for which the official had granted a filming permit. ROC 2018-4.

• Prison guards accepted thousands of dollars from a prisoner. ROC 2017-7, ROC 2016-8.

• State officials solicited and accepted flight upgrades (from coach class to business/first class) from an airline with which the officials’ agency had a contract. ROC 2017-4, ROC 2017-5.

In addition to implicating the gifts and gifts reporting laws, some of these actions also raise concerns under a separate statute – the fair treatment law.

B. The Fair Treatment Law (HRS § 84-13) The fair treatment law is an abuse of power statute. Generally, it prohibits state officials from abusing their positions by giving (or attempting to give) themselves or others any “unwarranted privileges, exemptions, advantages, contracts, or treatment.” HRS § 84-13. Each of the following cases implicated the fair treatment law: • A state highways worker needed to clear some debris from his property. He asked his supervisor for permission to use the State’s Bobcat skid-steer. The supervisor agreed, and the highways worker took the Bobcat home and used it for several days to clear his property. ROI 2020-7.

• An elected official “touched and kissed more than one woman in ways that were inappropriate and unwelcome.” He “made sexual comments, including comments on the physical appearance of more than one woman, that were inappropriate and unwanted.” ROI 2018-2.

• A state harbors official removed parts from a damaged state truck and took them for his personal use, directed subordinate employees to gather kiawe wood for his personal use, falsely certified that he disposed state equipment, and used a state purchasing card (“pCard”) to purchase automobile supplies for his personal vehicle. ROC 2019-1.

In addition to a general prohibition on abuse of position, the fair treatment law specifically prohibits state officials from: (1) using their positions to try to obtain outside employment or contracts; (2) soliciting or accepting extra compensation for performing their state duties; (3) using state resources for private business purposes; and (4) engaging in a substantial financial transaction with a subordinate or with a person or entity subject to the official’s regulatory control. HRS § 84-13(a)(1) – (a)(4). The third provision, referencing “private business purposes,” prohibits state officials from using state e-mail, state offices, state time, and other state resources for political campaigns, fundraising (except for state-sponsored fundraising, such as the Aloha United Way campaign), or other private business activities. See, e.g., ROI 2017-2 (resolving the investigation of an elected state official who used his aides – state employees, paid for with state funds – to perform work for his private consulting business; the official agreed to pay a $25,000 administrative penalty).

C. The Confidential Information Law (HRS § 84-12) State officials may not disclose confidential information, nor may they use confidential information to benefit themselves or someone else. HRS § 84-12. Despite the clarity of this provision, violations of this statute still occur. In one case, an elected state official disclosed confidential information from an executive session of a board meeting, even though she understood that some or all the information was confidential and that she lacked the authority to disclose the information. ROC 2019-2.

D. The Conflicts of Interests Law (HRS § 84-14) The Ethics Code’s conflicts of interests provisions should be intuitive for members of the bar. First, HRS § 84-14(a) requires that state officials recuse themselves from taking “official action” affecting a business or other undertaking in which they have a “financial interest.” A “financial interest” can be held

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by the state official, the official’s spouse or civil union partner, or the official’s dependent child, and it includes employment, an ownership interest in a business, an officership or directorship in an organization (including both for-profit and nonprofit organizations). HRS § 84-3. “Official action” is broadly defined as “a decision, recommendation, approval, disapproval, or other action, including inaction, which involves the use of discretionary authority.” Id. In short, state officials must recuse themselves from taking any discretionary action affecting a private organization with which they have a financial or fiduciary connection. There are some exceptions, of course, including for certain designated members of some state boards and commissions with specialized expertise and for state department directors. See HRS § 84-14(a). Generally, however, the law seeks to ensure that state officials’ loyalties are not split. Notably, legislators are not bound by this provision of the conflicts of interests law; instead, legislators are subject to the internal rules of the House of Representatives and the Senate with respect to conflicts of interests.

Second, state officials are prohibited from creating new conflicts of interests. HRS § 84-14(b). For example, suppose a state official’s job duties include overseeing a contract with a private business. The state official could not take a part-time job with that private business. It is not enough for the state official to be recused from future matters involving the private business; the Ethics Code prohibits the state official from acquiring the new conflict. Again, this provision does not apply to legislators.

Third, state officials are prohibited from assisting or representing private interests, for pay, before their own agencies.

HRS § 84-14(d). In other words, a state official may not be paid to help a private entity, even behind the scenes, in dealings with the official’s own agency. Unlike the first two provisions of the conflicts of interests law, this provision does apply to legislators. In other words, legislators cannot be paid by outside organizations or individuals to lobby their colleagues.

Fourth, and relatedly, state officials cannot be paid to assist or represent a private entity (again, even behind the scenes) before any state agency on a matter that the official worked on as a state official. Id. Again, this provision does apply to legislators, such that legislators may not assist or represent private parties in dealings with other state agencies on matters that they worked on as legislators.

E. The Post-Employment Law (HRS § 84-18) and Contracts Law (HRS § 84-15) Several provisions in the Ethics Code address ethics issues that arise when state officials leave, or are thinking of leaving, state service. First, the post-employment law, HRS § 84-18, seeks to address the possibility that a former state official

(representing a new private employer) may have special influence on, and access to, the official’s former agency.

Consequently, former state officials are subject to a twelve-month “cooling-off ” period, during which such former officials cannot communicate directly with their former agency on behalf of a private employer after leaving state office.9 HRS § 84-18(c). The law also prohibits state officials from communicating directly with any state agency on behalf of a private employer – again, for one year after leaving state service – regarding any matter the former official worked on while a state official. HRS § 84-18(c).

State agencies may, however, contract directly with a former official, to act on a matter on behalf of the State, after the official leaves state service. HRS § 8418(d). Typically, this provision comes into play when an agency wishes to hire the former official as a contractor on a limited basis to finish a project or other work that could not be completed before the former official left state service. Violations of the post-employment law are somewhat uncommon, although they do occur. In one case, a state employee was the liaison between a state agency and a contractor before the state employee left the agency to work for the contractor.

Without observing the twelve-month cooling-off period required by HRS § 84-18(c), the former state employee communicated with the employee’s former colleagues (now on behalf of the contractor) in violation of the post-employment law. ROI 2020-1.

Second, a bill passed by the Legislature in the 2021 session, and signed into law by Governor Ige, tightens the postemployment restrictions for certain highlevel state officials by prohibiting them from lobbying the Legislature for one year after leaving office. This bill requires a twelve-month cooling-off period for a small group of state officials, including department directors, trustees of the Office of Hawaiian Affairs, and the executive directors of agencies like the

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Ethics Commission and Campaign Spending Commission, before those officials may be paid to lobby the Legislature (or the executive branch on administrative rule changes). This additional lobbying restriction does not apply to state officials who serve only on an interim or acting basis for fewer than 181 days.

Third, the post-employment law prohibits former state officials from revealing confidential information (or using confidential information for their own or someone else’s benefit).

HRS § 84-18(a).10 Finally, the contracts law, HRS § 84-15(b), prohibits a state agency from entering into a contract with a private entity if: (1) the private company is assisted by a former official of the state agency; (2) the former official worked on the same matter while employed by the State; and (3) the former official left state service less than two years earlier. Again, violations of this provision are rare but can have severe consequences. In one recent case, a private organization responded to a Request for Proposals (“RFP”) from a state agency regarding the sale of a state asset. A former state employee – who had worked to prepare a draft of this RFP while employed by the State and had left state employment less than two years prior – assisted the private organization in preparing its response to the RFP and was named as one of the “key personnel” in the private organization’s response. The Commission concluded that, pursuant to HRS § 84-15(b), the State could not contract with the private organization. The Commission noted that “[t]he Former Employee . . . participated in several inventory inspections and e-mailed the Agency a list of RFP-related questions.

The questions were detailed in nature, and were seemingly based on the Former Employee’s prior knowledge of the inventory and the Draft RFP he had previously worked on during his employment with the Agency.” AO 2017-5 at 1. The Commission explained that the purpose of HRS § 84-15(b) is to prohibit the appearance of impropriety that can arise when a state employee participates in a contract matter as a state employee and then assists a private employer with the same matter. Specifically, the Commission stated: As the Commission has previously explained, such situations raise the appearance or danger of impropriety because the contracting entity would likely receive an unwarranted advantage over other potential bidders based on the former state employee’s special access to information or contacts within the former agency. In addition, the former state employee could improperly benefit by trading on his or her “insider knowledge” to secure future employment or business opportunities after leaving the state.

AO 2017-5 at 2 (citations omitted).

State officials often contact the Commission for confidential

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guidance shortly before or after leaving state service, particularly because looking for private employment while serving as a state official can raise other ethics issues. A prudent jobhunting state official may need to be recused from matters involving a prospective employer so as not to violate either the conflicts of interests law or the fair treatment law.

III. Restoring, and Preserving, the Public’s Trust in Government Multiple government agencies at the state and county level serve as watchdogs over Hawaii’s public servants. First and foremost, the Department of the Attorney General can bring both criminal and civil proceedings against state officials who break the law. In 2020, the Commission partnered with the Department to launch an anti-fraud hotline aimed at identifying fraud, waste, and abuse. The agencies developed a website and online complaint form (antifraud.hawaii.gov), as well as a dedicated phone hotline (587-0000) and dedicated email address (antifraud@hawaii.gov), where individuals can confidentially report suspected violations. These anti-fraud resources were created to ensure the public has access to a userfriendly and confidential method to report potential violations.

Four other state-wide offices also promote transparency and accountability in government: (1) the Office of the Auditor, whose mission is “to improve government through independent and objective analyses,” see https://auditor.hawaii.gov/; (2) the Office of the Ombudsman, which “independently and impartially investigates complaints against state and county agencies and employees,” see https://www.ombudsman.hawaii. gov/; (3) the Campaign Spending Commission, whose mission is “to maintain the integrity and transparency of the campaign finance process,” see http://ags.hawaii.gov/campaign/; and (4) the Office of Information Practices, which administers the Uniform Information Practices Act (UIPA), HRS chapter 92F (requiring open access to government records), and the Sunshine Law, part I of HRS chapter 92 (requiring open public meetings), “to promote open and transparent government in Hawai‘i,” see https://oip.hawaii.gov/. Each county also has its own ethics agency with jurisdiction over county officials, and the Honolulu Ethics Commission recently doubled the size of its staff. As such, Hawai‘i has significant legal infrastructure to minimize the risk of fraud, waste, and abuse, and Hawai‘i was recently ranked ninth in the nation for its anti-corruption laws (up from twelfth in 2018). See Coalition for Integrity, States With Anti-corruption Measures for Public officials (S.W.A.M.P.) Index, available at https://www.coalitionforintegrity. org/swamp2020/ (2020) and http://swamp.coalitionforintegrity.org/ (2018). Government agencies are certainly not alone in promoting integrity in government. The media, along with non-profit organizations such as Common Cause Hawai‘i, the

Civil Beat Law Center for the Public Interest, and the League of Women Voters, are vital in ensuring transparency and accountability in government.

For its part, the Commission has been taking novel and proactive steps to minimize the possibility of corruption. For example, the Commission recently partnered with two professors from the University of Hawai‘i Shidler College of Business to conduct an anonymous and confidential survey of state officials on ethics in state government. Not surprisingly, some survey respondents expressed predictable concerns about favoritism in the workplace. Nevertheless, the survey did not suggest that fraud by state officials is widespread or pervasive.11 The Commission has also been working with the Department to analyze state pCard records and identify unusual spending patterns by state offices. Additionally, the Commission is expanding its education program by launching new on-line trainings and conducting trainings via videoconference, which has enabled the Commission to reach more people with less use of state time (by both the trainers and the trainees).

Of course, the Commission – like the other government agencies discussed above – still depends heavily on whistleblowers and tenacious local journalists and advocates to bring misconduct to light. Most cases investigated and resolved by the Commission came about only because someone observed misconduct, recognized it to be wrong, and reported it to one or more government agencies and/or to the press. Inevitably, some state officials (or other witnesses to fraud, waste, and abuse) will believe that nothing will ever change or that the whistleblowers themselves will be retaliated against if they speak up. Complaints to the Ethics Commission, however, are maintained in strict confidence, and complaints may be made anonymously. The Commission investigates every matter within its jurisdiction thoroughly and fairly, and strongly encourages the public – including the readers of this article and their clients – to contact the Commission if there is a concern about unethical conduct by a public servant.

The Hawai‘i Constitution provides that “the highest standards of ethical conduct . . . come from the personal integrity of each individual in government.” Hawai‘i Const., art. XIV. When that personal integrity fails, the Commission – and its partners in state and local government – are committed to doing everything possible to restore and preserve the public’s confidence in government.12 ____________________________ 1 All Hawai‘i State Ethics Commission Resolutions and Opinions cited herein are available on the Commission’s website at https://ethics.hawaii.gov/opinionpubs/.

2 The Commission’s on-line training modules are available at https://ethics.hawaii.gov/ethicsonlinetraining/.

3 The Commission intends to ask the 2022 Legislature to amend the statute to require both periodic in-person ethics training for a larger

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cohort of high-level state officials and periodic web-based training for all other state officials.

4 Financial disclosure statements and other public data are available at https://ethics.hawaii.gov/publicdata/.

5 “Lobbying” includes any efforts to influence legislative action (that is, the passage or defeat of a matter in the Legislature), a ballot issue, or administrative rulemaking. “Lobbying” typically does not include communicating with the executive branch about other matters (e.g., individual contested case hearings), nor does it include appearing in court. HRS §§ 97-1, 97-2.

6 Many lobbyists register on behalf of multiple clients. In 2020, the Commission received and published 1,018 lobbyist registration statements from 486 lobbyists, representing 435 organizations, along with 1,207 lobbyist expenditure reports. In 2021 (as of early June), the Commission has received and published 866 lobbyist registration statements from 425 lobbyists, representing 376 organizations, along with 759 expenditure reports.

7 Staff may only undertake a limited investigation without obtaining approval from the Commission itself. HRS § 84-31(a)(4); HAR § 21-5-2.

8 In rare circumstances, the Commission may enter into a confidential settlement agreement. HAR § 21-5-12(d). The Commission may also issue an “Informal Advisory Opinion” to the alleged violator after a Charge is issued. HRS § 84-31(c). Redacted summaries of these Informal Advisory Opinions are published on the Commission’s website. HRS § 84-31(f).

9 To be more precise, the law prohibits employees from communicating with “the particular state agency or subdivision thereof with which the former employee had actually served.” HRS § 84-18(c) (emphasis added). As such, an employee who works for a division of a large agency may, depending on the circumstances, be permitted to communicate with other divisions of the agency without observing the twelve-month cooling-off period. See HAR § 21-9-1. Furthermore, the one-year cooling-off period applies only to those employees or legislators who serve for more than six months. HRS § 84-18(e).

10 Currently, this provision only applies to state employees who hold their positions for more than six months. However, Act 189 of 2021 (H.B. 671, H.D.2, S.D.2), effective January 1, 2022, makes the confidentiality provision applicable to all state employees upon leaving office regardless of the length of their state service.

11 The researchers, Associate Professors Sonia Ghumman, Ph.D., and Hannah-Hanh D. Nguyen, M.A., Ph.D., are preparing an analysis of this study for publication in an academic journal.

12 Many people assisted in the preparation and publication of this article, but the author wishes to offer special thanks to former Ethics Commissioner Susan DeGuzman for her incomparable editing.

Daniel M. Gluck has served as the Executive Director and General Counsel of the Hawai‘i State Ethics Commission since 2016. A graduate of Cornell University and Harvard Law School, Mr. Gluck is the former Legal Director of the American Civil Liberties Union of Hawai‘i.

He also served as a law clerk to Hawai‘i Supreme Court Justice James E. Duffy (ret.) and United States District Court Judge J. Michael Seabright, and later worked as a litigation associate with Alston Hunt Floyd & Ing and as an Adjunct Professor at the University of Hawai‘i William S. Richardson School of Law.

H SBA HAP PE NIN GS Board Actions The HSBA Board took the following actions at its meeting in May 2021: • Adopted the recommendation of the ad hoc committee to retain Volunteer Legal Services Hawaii (VLSH) on the annual attorney renewal form as an optin basis due to HSBA’s close relationship with VLSH, and add no other legal service providers to the form due to the unjustifiable cost in time and money to do so; and • Adopted the recommendation of the Nominating Committee to appoint the following individuals to the board of the Legal Aid Society of Hawaii for a term of 3 years: -Kristin Holland (new appointment) -Regan Iwao (reappointment) -Gary Murai (reappointment) -Blaine Rogers (reappointment) -Edmund Saffery (new appointment)

Member Benefits Spotlight Mercer Professional Liability Insurance Lawyers Professional Liability Insurance, underwritten by Swiss Re Corporate Solutions America Insurance Corporation, a member of Swiss Re Corporate Solutions, is available to HSBA members at affordable premiums. Contact the Mercer Hawaii Bar Service Center at (800) 200-4089 or visit https://www.hsbainsurance.com for more information.

Mercer Life Insurance Program Mercer Life Insurance Program offers HSBA members group rates on Group Term Life, Group Level Term Life, Personal Accident, and Senior Term Life Insurance. Such policies are underwrit-

ten by ING/Reliastar Insurance Company and administered by Mercer. Call (866) 810-9451 or visit https://www.hsbainsurance.com for more information.

lining and epoxy coating services with proof of HSBA membership. Visit https://pueoplumbing.com for more information.

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Senior Move Managers, LLC/De-clutter Hawaii Senior Move Managers, LLC/Declutter Hawaii understands that there are many physical, psychological, and emotional issues that arise when downsizing our lives. De-clutter serves as caring and compassionate consultants to seniors and their families with the goal of minimizing stress for everyone. It is a one-stop shop that helps seniors make a stress-free move from their old house to their new home, assists in the downsizing and de-cluttering of personal belongings, and assists families after a loved one has passed away and needs to clear out their estate. De-clutter understands your needs are unique and are trained to create a customized plan that addresses your specific situation.

Senior Move Managers, LLC/Declutter Hawaii will provide a 5% services discount when you show your HSBA card.

• AFLAC Supplemental Insurance – Pays direct-to-you cash benefits to help with expenses not covered by medical insurance (e.g., critical illness, cancer care, accident protection) • Transamerica Group Universal Life-Designed for employer member groups with five or more participants -Guarantee issue up to age 80 -No physical exams or blood tests -Accelerated Living Benefit for senior care expenses -Portable if you should leave your employer Contact Richard Fonseca of PSH Insurance Inc. at (808) 531-6211 or r.fonseca@pshinsurance.com. PSH Insurance Inc. is an approved partner also providing Complementary Employee Benefit Insurance Reviews and Temporary Disability Insurance rates exclusively for HSBA member firms. Visit their website to learn more about PSH and its services at https://www.pshinsurance.com.

Pueo Plumbing Pueo Plumbing is a locally owned, family business with more than 20 years of experience in site utility construction, residential and commercial water and sewer line installation, septic system installation and repair, drain cleaning, and residential and commercial plumbing.

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Visit https://hsba.org/memberbenefits to get more information on the more than 70 member benefits available.

Member Contact Profile: Change of Business or Residence Information The Supreme Court requires all members to notify the HSBA by mail, fax, or email within thirty days of any change of business or residence information that occurs after registration.

See RSCH Rule 17(d)(1).

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The HSBA collects four types of addresses: 1. Communications address (for HSBA use; mailing address and email address are required) 2. Business address (for publication, may be the same as communication address) 3. Residential street address (please do not list address for P.O. Boxes or other mailbox, etc.)

4. Service of process street address (do not list addresses for P.O. Boxes or other mailbox, etc.)

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Notes: -The Supreme Court and the Office of Disciplinary Counsel require service of process, residential street address, and a residential landline or cell phone number.

-The HSBA keeps this information confidential unless requested by the Supreme Court or Office of Disciplinary Counsel.

-Members can provide a P.O. Box, mailbox, or a drop box address, if desired, for HSBA communication purposes.

-Contact the HSBA if you need to utilize an alternative street address for the required service of process address.

-HSBA members are strongly encouraged to provide an e-mail address. The HSBA utilizes e-mail for elections, judicial nomination and evaluations, important regulatory information, and other announcements. E-mail address information will be shared with HSBA Sections, Neighbor Island Bar Association, and Specialty Bar Associations if members choose to join those groups.

C O URT BR IEF S First Circuit Judicial Assignments, June 2021 The following First Circuit judicial assignments are effective June 28: The Honorable Shirley M. Kawamura, Twelfth Division presiding judge, is assigned to the Criminal Trial Division and designated as Deputy Chief Judge/Administrative Judge of the Criminal Division. (This is a clarification of Judge Kawamura’s current assignment from Criminal Division to Criminal Trial Division, including the misdemeanor jury trials.)

The Honorable Matthew J. Viola, Thirteenth Division presiding judge, is assigned to the Family Division and designated as Deputy Chief Judge, Family Division/Senior Family Court Judge.

The Honorable Christine E. Kuriyama, Sixteenth Division presiding judge, is assigned to the Criminal Division and HOPE Court cases.

key policy areas. Here is how Hawai‘i ranked in each: Attorney access – 14th Support for self-represented litigants – 6th Language access – 7th Disability access – 1st (tied with Connecticut) Hawaii’s top 10 ranking reflects a tremendous collaborative effort by many parties, including the Judiciary, the Hawai‘i Access to Justice Commission, the Hawai‘i Justice Foundation, legal service providers, and community partners, including the William S. Richardson School of Law, the Office of Language Access, and the Hawaii State Bar Association and its members.

“On behalf of the Judiciary, I want to acknowledge those whose work has contributed greatly to this recognition, and thank them for their commitment to expanding access to justice in Hawai‘i,” Chief Justice Recktenwald said.

Chief Justice Recktenwald Speaks at Juneteenth Bill Signing Ceremony

The Honorable Trish K. Morikawa, Twentieth Division presiding judge, is assigned to the Criminal Division, including Mental Health Court, Drug Court, HOPE Court cases, and Veteran’s Court.

State Courts to Use Zoom for Video Remote Hearings As of July 15, all courts across the state transitioned to strictly utilizing Zoom as the platform for conducting video remote hearings. “We are grateful to everyone who responded to our recent survey,” said Chief Justice Mark Recktenwald.

“That feedback was very helpful in reaching this decision, and we appreciate the support of the bar.”

He added, “Use of a single platform throughout the Judiciary will allow for greater standardization of processes and consistent instructions to all court users.”

Hawaii Ranks Sixth in Nationwide Access to Justice Study The National Center for Access to Justice in June released its Justice Index 2021, which ranks the degree to which each state has adopted best practices for ensuring access to justice for all individuals. The Hawai‘i State Judiciary is proud to report that Hawai‘i was ranked sixth overall.

The Justice Index is a periodic comprehensive study providing an in-depth review of each state’s performance in four

Chief Justice Mark E. Recktenwald joined Gov. David Ige, First Lady Dawn Amano Ige, Samantha Neyland, Ty Trumbo, Alphonso Braggs, Letitia Brown Sen. Roz Baker, Rep. John Mizuno, Rep. Lynn DeCoite, University of Hawaii President David Lassner, Honolulu City Council Chair Tommy Waters and Sandy Ma for the Governor’s signing of Senate Bill 939 Recognizing Juneteenth. The bill signing ceremony was held June 16, on the lanai at Washington Place.

A copy of Chief Justice Recktenwald’s remarks at this historic event are available on the Hawaii State Judiciary website, in the June 17, 2021 “Featured News” post.

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CAS E NOTES Supreme Court Civil Procedure Provident Funding Associates v.

Wittmeyer, No. SCWC-17-0000453, June 16, 2021, (Recktenwald, C.J.). This case required the Hawaii Supreme Court to consider the binding effect of a stipulation. The parties to this foreclosure, after summary judgment was entered in favor of the note holder but before sale, entered into a stipulation in which they agreed to postpone the foreclosure auction while they worked to pursue a private sale. No private sale came to pass, and the property sold at auction for less than the parties had hoped a private sale would yield. They disputed the effect the stipulation should have had on the circuit court proceedings. The Hawaii Supreme Court held that a stipulation made during the course of litigation – reduced to writing, agreed to by all parties, and filed with the court – operates in many respects like a contract and generally binds the parties to its terms. The circuit court and ICA therefore erred by failing to treat the stipulation at issue as a binding agreement.

Collections Wells Fargo Bank, N.A. v. Fong, No. SCWC-16-0000435, May 28, 2021, (Nakayama, J.). A bank seeking to foreclose on a mortgage and note bears the burden of establishing that the borrower defaulted under the terms of the agreements. In order to satisfy this burden and prevail on a motion for summary judgment, the bank must submit evidence which clearly demonstrates the borrower’s default. Wells Fargo Bank, N.A. (“Wells Fargo”) sought a judicial foreclosure of the residence of Marianne S. Fong (“Fong”). In order to prove that Fong had defaulted, Wells Fargo submitted a ledger without explaining how to read the ledger. In the absence of any explanation, the ledger was ambiguous and presented genuine issues of material

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Appeal Pointer A motion filed in the appellate court may be summarily denied without prejudice if the motion is not accompanied by proof that the motion was served on all parties at or before the time of filing. HRAP 25(b), 25(d), 27(a). fact. Furthermore, although the ledger indicated that Wells Fargo billed Fong for lender-placed insurance, there was only ambiguous evidence regarding whether Wells Fargo properly charged Fong for the insurance. Thus, there was also a genuine issue of material fact concerning whether Fong actually owed the amounts that forced her into the alleged default. The ICA consequently erred in affirming the circuit court order granting summary judgment.

U.S. Bank Trust, N.A. v. Verhagen, No. SCWC-17-0000746, June 21, 2021, (Eddins, J.). This case concerned the admissibility and evidentiary weight of documents and declarations at issue in a foreclosure proceeding. The Hawaii Supreme Court considered: whether promissory notes were hearsay, admissible only if they fell within an exception to the hearsay rule; whether a copy of a promissory note was self-authenticating under Hawaii Rules of Evidence Rule 902(9); the scope and limits of the business records exception to the hearsay rule; and the evidentiary burden mortgagees must meet to establish standing in the foreclosure context. The Hawaii Supreme Court concluded that promissory notes were not hearsay, that copies of promissory notes are not self-authenticating under Haw. R. Evid. Rule 902(9), and that, under the incorporated records doctrine, business records may, in certain circumstances, be admissible even absent testimony concerning the business practices or records of their creator. The Hawaii Supreme Court also clarified the evidentiary burden on

mortgagees seeking to show their possession of a promissory note at the time a foreclosure complaint was filed.

Criminal State v. Milne, No. SCWC-190000594, June 23, 2021, (McKenna, J.).

In Count 1 of a complaint filed in the family court, the State charged Noguchi Milne (“Milne”) with abuse of family or household member, in violation of Haw. Rev. Stat. § 709-906(1) and (5) (2014), against Complaining Witness 1 (“CW1”). Count 2 charged Milne with third degree assault in violation of Haw. Rev. Stat. § 707-712(1)(a) (2014) against Complaining Witness 2 (“CW2”). The family court granted Milne’s oral motion to dismiss Count 2, concluding it lacked subject matter jurisdiction over that count. On appeal, the ICA concluded the family court erred in dismissing Count 2 because the family court had concurrent subject matter jurisdiction over the charge based on Haw. Rev. Stat. § 571-14(b) (2014). The ICA ordered that Count 2 be remanded to the family court for further proceedings consistent with its memorandum opinion. On certiorari, Milne concedes that the family court had concurrent jurisdiction over Count 2. Milne argues, however, that the family court did not dismiss Count 2 based on a lack of subject matter jurisdiction. He maintained the family court had discretion to decline the exercise of its concurrent jurisdiction over Count 2.

The Hawaii Supreme Court held: (1) the ICA was correct in ruling that the family court dismissed Count 2 for lack of subject matter jurisdiction and erred by doing so, as Haw. Rev. Stat. § 571-14(b) provided the family court with concurrent subject matter jurisdiction over Count 2; and (2) the family court continues to have subject matter jurisdiction over Count 2 despite the dismissal of Count 1 with prejudice, and it is for the family court to address Count 2 on remand.

State v. Pedro, No. SCWC-190000439, June 4, 2021, (Eddins, J., with Wilson, J. concurring separately, and Recktenwald, C.J., concurring in part and dissenting in part, with whom Nakayama, J., joins). Theo Pedro (“Pedro”) pleaded no contest to four counts of sexual assault in the second degree. Before sentencing, Pedro moved to withdraw his pleas. He said he was innocent. He wanted a trial. The circuit court denied Pedro’s motion. The ICA affirmed the circuit court’s decision.

Consistent with the Hawaii Supreme Court’s “liberal approach” to deciding motions for plea withdrawal before sentencing, see State v. Jim, 58 Haw. 574, 576, 574 P.2d 521, 522-23 (1978), the Hawaii Supreme Court concluded that Pedro presented a “fair and just reason” for the withdrawal of his pleas. The trial court erred in denying Pedro’s motion.

Wilson, J. concurred, joining the majority opinion but writing to address the “fair and just” reason Pedro presented to continue the hearing on his motion to withdraw his plea based on the evidence of recantation he discovered after entering his plea, but before sentencing. The sworn testimony of his mother was that she received information that the complaining witness (”cw”) recanted. Specifically, she received hearsay information that the complaining witness claimed, “it was not her doing” and that “it wasn’t her . . . who made up the story [about the accusation].” Pedro was thus seeking the opportunity to exonerate himself based on this newly discovered evidence that directly supported his defense. To continue the hearing to withdraw his plea based on his intention to investigate the newly discovered—albeit hearsay—evidence was an eminently “fair and just” request the court was compelled to grant under the liberal standard for withdrawal mandated by Hawaii Rules of Penal Procedure Rule 32(d). As noted in the Majority opinion, “the trial court . . . did not conduct the full ‘fair and just reason’ inquiry required by Jim.” See State v. Jim, 58 Haw. 574, 576, 574 P.2d

521, 523 (1978).

Recktenwald, C.J., joined by Nakayama, J., concurred in part and dissented in part. Recktenwald, C.J. agreed with the majority that the test for withdrawing a plea set forth in State v. Gomes, 79 Hawaii 32, 37, 897 P.2d 959, 964 (1995), should be clarified, and he further concurred with the majority’s reformulation of the test. Pedro claimed that the encounter was consensual, and that he acted to get revenge on Pedro’s partner, who had cheated on him. When Pedro was arraigned on July 2, 2018 in family court, the court ordered that Pedro have “no contact, directly or indirectly through third parties” with the CW. Pedro pleaded no contest to four counts of Sexual Assault in the Second Degree on January 7, 2019. His counsel thereafter moved to withdraw, and the court granted the motion. At that hearing, on April 4, 2019, Pedro suggested to the court that he wished for new counsel to assist him in withdrawing his plea. At the end of the hearing, the State moved for the court to institute a no-contact order prohibiting Pedro’s family and friends from contacting the CW. The court again ordered Pedro not to have any contact with the CW and to advise his “family or friends who may have any contact with [the CW]” not to do so either. On May 3, 2019, with the assistance of new counsel, Pedro moved to withdraw his plea. The motion alleged that Pedro “did not fully understand his options at trial,” that his prior counsel failed to “fully explain [Pedro’s] options in regard to a trial and pressured him into changing his plea,” and that Pedro “is adamant that he is not guilty[.]” The State opposed the motion, claiming, among other things, that it would be prejudiced by the withdrawal of the motion because since the plea, the CW had faced intense pressure from her and Pedro’s family to recant and take the blame herself for the events of June 24, 2018. The family court denied the motion to withdraw, acknowledging that “someone has pressured the complaining witness to not cooperate[.]” As relevant

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Solicitation for Application to Provide Administrative Hearing Service by Attorneys The Hawaii State Department of Land and Natural Resources (DLNR) may require qualified, licensed attorneys to provide administrative hearing service for its contested cases during Fiscal Year 2022 (July 1, 2021 to June 30, 2022). Any party interested in providing such service should send resume or curriculum vitae in PDF format to the DLNR Administrative Proceedings Office by email at DLNR.CO.APO@hawaii.gov.

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here, the court “believe[d] the State’s argument [that there] is an uncooperating family pressure situation on the complaining witness. And the defendant sees that as his opportunity.” It concluded that “there will be substantial prejudice to the State if the defendant is allowed to withdraw his plea, if their witness is no longer available.” Its findings of facts and conclusions of law (which also discussed the testimony about the alleged recantation adduced at sentencing) reflected that “[t]he State has relied upon the no contest plea to its substantial prejudice.” Initially, Recktenwald, C.J. agreed with the majority that revisiting the test for withdrawal of a guilty or no contest plea is appropriate. But in this case, the State attested that the CW faced intense pressure from her family to recant after Pedro’s plea. He did not doubt that uncooperative witnesses are “unexceptional” in criminal cases, but there is wide consensus in other jurisdictions that when a witness becomes reluctant or uncooperative following the plea, the prosecution is prejudiced, and that prejudice weighs against granting a motion to withdraw the plea. The majority concluded that the prejudice to the State in this case was “minimal” because it was speculative, lacked evidentiary support, and not caused by Pedro’s plea.

Recktenwald, C.J. disagreed. First, the prejudice here was not speculative. Second, evidence supported the State’s argument for prejudice, and likewise, third, the record belied the majority’s argument that the CW’s reluctance to testify was not caused by the plea. Recktenwald, C.J. would conclude that the State showed it would be substantially prejudiced by the withdrawal of Pedro’s plea in this case.

State v. Sandoval, No. SCWC-180000636, May 27, 2021, (Recktenwald, C.J.). Manuel Sandoval was the defendant in three separate criminal cases related to repeated violations of an injunction against harassment. The injunction was put in place against Sandoval by Complaining Witness 1, a

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woman with whom Sandoval used to work. Sandoval pleaded no contest in two cases to a total of eleven counts of violating an injunction against harassment; in both cases, he was sentenced to probation.

Two years later, he was convicted after a bench trial of one count of violating an injunction against harassment, and one count of second-degree assault of Complaining Witness 2. At sentencing, the circuit court revoked Sandoval’s probation in the two prior cases based on Sandoval’s stipulation that he had violated the terms of his probation. Following the revocation of his probation, the court sentenced Sandoval to consecutive one-year terms for each of the twelve total counts of violating the injunction against harassment and five years for the assault conviction, for a total of seventeen years of imprisonment.

The Hawaii Supreme Court concluded that, before accepting a defendant’s stipulation to a probation violation, the trial court must ensure that the defendant knowingly, intelligently, and voluntarily enters into the stipulation. A stipulation to a violation of the terms of one’s probation can have significant consequences, including - as was the case here - the potential for extended incarceration. The record does not reflect that Sandoval understood the consequences of stipulating to the State’s motions to revoke probation, and accordingly, the stipulation should be vacated. Moreover, at Sandoval’s resentencing hearing, the circuit court did not sufficiently justify the imposition of consecutive sentences for each count while considering the factors in Haw. Rev. Stat. § 706-606 (2014). Thus, the Hawaii Supreme Court vacated Sandoval’s sentence and remanded for further proceedings related to Sandoval’s probation revocation and resentencing.

Labor In the Matter of the Arb. Between United Pub. Workers and St. of Haw., Dep’t of Transp., No. SCWC-16-0000666, May

21, 2021, (McKenna, J.). The Hawaii Supreme Court addressed whether the State of Hawaii (“State”) “incurred” attorney’s fees under Haw. Rev. Stat. § 658A-25 (2011) in a grievance arbitration when it was represented by an attorney employed by the State’s Department of Attorney General. The State sought $20,044.49 in appellate attorney’s fees and $35.20 in costs under Haw. Rev. Stat. § 658A-25 as the “prevailing party” in an appeal of a grievance arbitration with the United Public Workers, AFSCME, Local 646, AFL-CIO. The ICA awarded costs but no attorney’s fees, on the grounds the State “failed to demonstrate that it incurred, as an expense, liability, or legal obligation to pay, appellate attorney’s fees[.]” The Hawaii Supreme Court held that the State “incurred” attorney’s fees for the purposes of Haw. Rev. Stat. § 658A-25 and therefore, granted the State’s request for attorney’s fees in the amount of $16,197.50.

Land Protect and Preserve Kahoma Ahupua`a Ass’n v. Maui Plan. Commission, County of Maui, No. SCWC-15-0000478, June 16, 2021, (McKenna, J.). This case arose from Stanford Carr Development, LLC’s (“Carr”) application for a Special Management Area (“SMA”) use permit to build affordable housing (“the Project”) within the County of Maui’s SMA. The Protect and Preserve Kahoma Ahupua‘a Association (“PPKAA”) filed a petition to intervene in the SMA use permit application proceedings with the Maui Planning Commission (“Commission”) seeking to address the Project’s environmental and aesthetic impacts. The Commission denied PPKAA’s petition on the grounds that it failed to demonstrate its interests were different from those of the general public, as required

by Section 12-201-41 of the Rules of Practice and Procedure for the Commission. The Commission then approved Carr’s SMA use permit application. PPKAA appealed the Commission’s denial of its petition to

intervene and approval of Carr’s SMA use permit application to the circuit court, which affirmed the Commission’s decisions. On appeal, the ICA determined PPKAA had standing to intervene as a matter of right and that PPKAA was denied procedural due process to protect its Hawaii Constitution article XI, section 9 right to a clean and healthful environment, as defined by the Coastal Zone Management Act (“CZMA”). The ICA also held the Commission was required to make findings on the Project’s consistency with the Maui County general and community plans pursuant to Haw. Rev. Stat. § 205A-26(2)(C) (2017). The ICA vacated the circuit court’s decision and remanded to the Commission. On review of Carr’s certiorari application, the Hawaii Supreme Court agreed with the ICA that (1) PPKAA sufficiently demonstrated that it had standing to intervene in the SMA use permit proceedings; (2) the CZMA was a law relating to environmental quality for the purposes of article XI, section 9 of the Hawaii Constitution and that PPKAA was denied procedural due process to protect its right to a clean and healthful environment; and (3) the Commission was required to make findings on the Project’s consistency with the general and community plans pursuant to Haw. Rev. Stat. § 205A-26(2)(C).

Utilities In the Matter of Hawaiian Electric Light Co., Inc., No. SCOT-20-0000569, May 24, 2021 (Eddins, J., with Wilson, J. concurring). Appellant Hu Honua Bioenergy, LLC (“Hu Honua”) appealed the Public Utilities Commission’s (“PUC”) Order No. 37205, that “denied” a competitive bidding waiver to Hawaii Electric Light Company, Inc. (“HELCO”).

Hu Honua also appealed the PUC’s Order No. 37306, that denied Hu Honua’s request for reconsideration of Order No. 37205. Because both Order No. 37205 and Order No. 37306 sprang from a misreading of the holding in Matter

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of Hawai‘i Elec. Light Co., Inc., 145 Hawaii 1, 445 P.3d 673 (2019) (“HELCO I”), the Hawaii Supreme Court vacated them and remanded the case to the PUC for further proceedings consistent with this opinion and the Hawaii Supreme Court’s instructions in HELCO I. Wilson, J., concurred with the Majority’s decision to remand to PUC, and wrote to clarify that the majority’s decision gives discretion to the PUC to determine again whether a waiver of competitive bidding should be granted to HELCO. Just as “the legislature is presumed not to intend an absurd result, and inconsistency, contradiction, and illogicality[,]” so too should Supreme Court case law. Specifically, the Hawaii Supreme Court’s decision in HELCO I must be construed to avoid absurd and illogical results. State v. Tsujimura, 140 Hawaii 299, 307, 400 P.3d 500, 508 (2017) (quoting State v. Arceo, 84 Hawaii 1, 19, 928 P.2d 843, 861 (1996)).

Intermediate Court of Appeals Family In the Matter of JK, No. CAAP-170000922, June 10, 2021, (Hiraoka, J.). “[C]ivil commitment of the mentally ill for any purpose constitutes a significant deprivation of liberty that requires due process protection.” In re Doe, 102 Hawaii 528, 543, 78 P.3d 341, 356 (App. 2003) (cleaned up) (quoting Addington v.

Texas, 441 U.S. 418, 425 (1979)). In this case, Respondent-Appellant JK was involuntarily hospitalized under Haw. Rev. Stat. chapter 334. He appealed from the “Order Granting Petition for Involuntary Hospitalization” entered by the family court on December 14, 2017.

The ICA held: (1) it had jurisdiction to decide JK’s appeal under the collateral consequences exception to the mootness doctrine; and (2) the family court erred when it found there was clear and convincing evidence that JK was imminently dangerous to himself or others within the meaning of Haw. Rev. Stat. §§ 334-1 and 334-60.2.

CH v. Child Support Enforcement Agency, No. CAAP-19-0000647, June 15, 2021, (Leonard, J.). This child support case concerned an administrative agency decision to impute income to a father who was terminated from his job and unable to secure comparable work. Income was imputed to him commensurate with his earnings at a prior job, which he had left in an attempt to advance his career.

After he was abruptly fired, the father immediately sought similar positions, but was only able to get hired at a lower-paying job. The ICA held that pursuant to, inter alia, the 2014 Hawaii Child Support Guidelines (“Guidelines”): (1) either a responsible parent or a custodial parent may request a modification of child support less than three years after the prior support order, but the requesting parent must show proof of a substantial or material change in circumstances; (2) a material change of circumstances will be presumed if child support as calculated

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pursuant to the Guidelines is either ten percent greater or less than the support provided for in the outstanding order; (3) when a parent’s change of income is the reason a request for modification of child support is made, that request should in the first instance be considered to be a request in the regular course, pursuant to Section IV of the Guidelines, and not as an exceptional circumstance; (4) the discretionary utilization of imputed income to calculate child support is the exception, not the rule, in the determination of child support under the Guidelines; (5) the standard method for determining child support, which involves completing a worksheet using the parents’ actual monthly gross income must be the starting point in every case, including in cases involving a request to impute income at a higher amount; (6) the family court or administrative agency may consider what a parent is capable of earning if the parent attempts in good faith to secure proper employment, i.e., the parent’s full earning capacity; (7) in this case, the administrative hearing officer’s findings were clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record, and were affected by an erroneous view of the law with respect to imputed income; and (8) in the absence of proper consideration of the factors required in the Guidelines, the administrative hearing officer’s imputation of income was arbitrary and capricious, and a clearly unwarranted exercise of discretion affecting the father’s substantial rights. The ICA further held that, prospectively, a decision to impute income to a parent based on employment below full earning capacity must be accompanied by findings of fact concerning: (a) the determination that a parent is employed below full earning capacity; (b) the reasons for the limited employment; and (c) the factors utilized in the determination of the amount of the imputed income.

Contingent or Success Fees in Transactional Matters:

Ethical Considerations and Risks

by Lennes N. Omuro

In today’s dynamic legal environment, there is increasing consideration of alternate fee arrangements beyond the traditional system of fees based on the hourly rates of attorneys. Sometimes lawyers agree to fee arrangements with their clients in transactional matters where the lawyer may receive fees only if a transaction closes or, perhaps more common, lawyers may agree to lower than normal hourly rates with an enhanced fee or some other type of bonus if the transaction closes. Just as the use of contingent or success fee arrangements in litigation matters may provide a financially challenged client with the opportunity to pursue a claim, use of flexible fee arrangements may also be necessary for or at least attractive to some clients in transactional matters. Use of contingent or success fees in transactional matters are not, however, without risks and should be carefully considered before a lawyer agrees to such a fee arrangement.

In particular, lawyers should be aware of the ethical requirements that apply to all contingent fee arrangements.

Hawaii Rules of Professional Conduct (“HRPC”) Rule 1.5(a) specifically states that “a lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses.” The rule goes on to refer to eight factors to be considered in determining the reasonableness of a fee including, but not limited to, the time and labor required, the amount involved and results obtained, and “in contingency fees cases the risk of no recovery and the conscionability of the fee in light of the net recovery to the client.”1 Attorneys should also keep in mind that the eight factors listed under Rule 1.5(a) are not exclusive.2 Comment 3 to Rule 1.5 further provides as follows: Contingent fees, like any other fees, are subject to the reasonableness standard of paragraph (a) of this Rule. In determining whether a particular contingent fee is reasonable, or whether it is reasonable to charge any form of contingent fee, a lawyer must consider the factors that are relevant under the circumstances. Applicable law may impose limitations on contingent fees, such as a ceiling on the percentage

allowable, or may require a lawyer to offer clients an alternative basis for the fee. Applicable law also may apply to situations other than a contingent fee, for example government regulations regarding fees in certain tax matters.3 Additional requirements for contingent fee arrangements are set forth under HRPC Rule 1.5(c) including, but not limited to, the need for the contingent fee agreement to be in writing signed by the client with a description of the method by which the fee is to be determined and the expenses that will be borne by the client.

Next, lawyers should be especially aware of the conflict of interest considerations that are likely to arise when entering into a contingent or success fee arrangement in transactional matters. HRPC Rule 1.7 states that a lawyer has a concurrent conflict of interest if, among other things, there is a significant risk that the representation of a client will be materially limited by a personal interest of the lawyer. Comment 10 to this rule explains that “a lawyer’s own interests should not be permitted to have an adverse effect on representation of the client.” Examples provided in the comment include situations where the probity of a lawyer’s own conduct in a transaction is in serious question and where a representation is affected by a lawyer’s business interests. Lawyers should also consider the possible applicability of HRPC Rule 1.8, which pertains to the situation where a lawyer enters into a business transaction with a client or

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knowingly acquires a pecuniary interest adverse to a client.4 Contingent or success fee arrangements therefore present risks to a lawyer because of the possibility that the client may claim that the lawyer proceeded to work towards, and even encouraged, a bad deal because of the lawyer’s desire to recover a contingent or success fee upon the closing of the transaction. If a transaction or investment turns sour, it is not difficult to imagine the disgruntled client turning against the lawyer and, in hindsight, attacking the lawyer’s work and advice by arguing that the lawyer was motivated by the lawyer’s own personal interest in closing the deal. Caution should therefore be exercised before entering into an engagement agreement with a client involving a substantial contingent or success fee that is dependent on the closing of a transaction. ______________ 1

See HRPC Rule 1.5(a)(1) to (8).

Comment 1 to HRPC Rule 1.5.

3 In addition, HRPC Rule 1.5(d) specifically prohibits the use of contingent fees in certain domestic relations situations and when representing a defendant in a criminal case.

4 Comment 1 to HRPC Rule 1.8 does indicate that the requirements of paragraph (a) do not apply to “ordinary” fee arrangements between client and lawyer.

2

Lennes N. Omuro is a partner at Goodsill Anderson Quinn & Stifel and a member of its litigation section. He has experience in various areas including professional malpractice and has served as his firm’s Professional Responsibility Committee Chairperson and as in-firm Counsel.

[Ed. Note: This article was previously published in the December 2017 issue of the Hawaii Bar Journal.]

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