Jury should weigh rail dispute, state high court says

Jan. 5—The Hawaii State Supreme Court has ruled that the merits of the ongoing dispute involving construction of a planned rail station within real estate developer Howard Hughes Corp.'s 60-acre master-planned property in Kakaako should be decided by a jury rather than a judge.

The Hawaii State Supreme Court has ruled that the merits of the ongoing dispute involving construction of a planned rail station within real estate developer Howard Hughes Corp.'s 60-acre master-planned property in Kakaako should be decided by a jury rather than a judge.

The years-long case, previously heard in Circuit Court, concerns the Texas-based developer, doing business here as Victoria Ward Ltd., and Honolulu Authority for Rapid Transportation's 2018 condemnation of about 2 acres containing roughly 25 parcels owned by the developer—from Cooke to Kamakee streets.

The property was originally slated for a master-­planned, permitted, mixed-use development within Ward Village.

The projected cost to taxpayers to acquire the land for the rail line's Kakaako station near Ward Avenue has been reported to be as much as $200 million, with HART by 2021 having spent nearly $23.3 million in legal fees.

In 2023 the state Supreme Court took up the case, which largely rested on unsettled points of law over just compensation related to eminent domain and land rather than the actual rail project itself.

A number of appeals at issue concerned Victoria Ward's claims for just compensation and severance damages—typically, the amount determined as the loss of value to remaining property over the value of land and structures taken by the government.

Among the issues was HART's contention that the developer's project would receive "special benefits " for being so closely located to the pending rail project and station, and therefore, the developer should receive much less by way of just compensation in this case that seeks damages.

On Dec. 29 the high court's ruling in HART v. Victoria Ward generally sided with the developer's desire to see a jury rather than a judge decide the merits of this case.

"We acknowledge the factual and legal complexity of this case, and the circuit court's legitimate concern with narrowing the issues for trial. However, we conclude that in several circumstances, the Circuit Court incorrectly used summary judgment to resolve disputed factual issues, " the ruling reads. "Most notably, the question of whether Victoria Ward is stopped from seeking severance damages involves disputed questions of fact and should be presented to a jury."

Ultimately, the high court remanded the case to Circuit Court for a future jury trial.

"The evidence presented by both parties is in large part ambiguous and circumstantial, requiring a factfinder to weigh credibility and evaluate many separate pieces of evidence. In sum, there is a genuine dispute of material fact that should be presented to a jury."

Victoria Ward responded to the ruling.

"We are pleased with the Supreme Court's decision and detailed analysis which affirms that a jury is the appropriate means to resolve what is due as a result of the property taking by HART, " the developer said in a written statement. "Ward Village, along with restaurants, retailers, building owners and other developers in this neighborhood have all been affected by HART's condemnation and Victoria Ward Ltd. is seeking fair compensation for our land."

HART also commented on the decision.

"Among other things, the Court's decision sustained HART's basic legal premise that Howard Hughes is bound by the mandate in Howard Hughes' Master Plan Permit to 'address and incorporate' the rail project in its development of Ward Village, " the agency's statement reads. "Accordingly, HART is confident that a jury will conclude that the requirement for Howard Hughes to 'address and incorporate' the rail guideway and the Kakaako rail station into their development is not consistent with Howard Hughes' assertions that the rail project negatively impacted their development of Ward Village and caused large monetary damages."

The rail agency asserts that its "expert appraiser has valued the easements being taken by HART at approximately $14 million."

"HART believes that any severance damages suffered by Howard Hughes are more than offset by special benefits to Howard Hughes as a result of the rail project, " the statement reads. "This decision has no impact on HART's construction plans for the rail project."

In June, lawyers for Victoria Ward and HART were each allotted about 45 minutes to present their respective cases to the high court.

Among the many arguments, Victoria Ward lawyer David Battaglia said the Circuit Court erred in its prior rulings on "highest and best uses " for the property, as well as for the damages his client sought due to the incursion of rail onto the property.

Battaglia would also argue that a master plan permit gained by Victoria Ward in the late 2000s did not then show where the route for the city's rail line would go, particularly as it pertained to the Ward Village property.

But HART's legal team disputed the developer's assertions regarding the Ward Village project.

"This claim is an outrageous claim seeking windfall, an enormous windfall—$100-plus million at public expense, " HART's lawyer Terence O'Toole told the high court. "Why ? Because Howard Hughes is seeking these damages to do exactly what it promised to do in the master plan permit."

Moreover, he noted Ward Village was, in fact, a transit-­oriented development along a known rail line.

"They knew the train was coming, they also knew it was coming to a station, " O'Toole said. "This was part of a transit-­oriented community."

According to court documents, the matter between HART and Victoria Ward began well over a decade ago.

In 2009 the Hawaii Community Development Authority issued a master plan permit for the Ward Village development, which covers an area of approximately 60 acres in the Kakaako Mauka area owned by Victoria Ward. The site proposes a pedestrian-friendly, smart-growth community.

Eventually, the parties would disagree over language in the master plan permit—which states, in part, that "a more detailed transit route and station location shall be addressed and incorporated "—and whether it precluded Victoria Ward from recovering severance damages for impacts to property not taken, court documents state.

In due course the Circuit Court issued a number of summary judgment orders preventing Victoria Ward from seeking severance damages.

HART appeals from other Circuit Court rulings include those specifying some of Victoria Ward's damages may not be offset by certain alleged "special benefits " flowing from the rail project, the court states.

And according to a 2021 HART report related to this case, Victoria Ward was expected to seek $200 million in severance damages.

Meanwhile, the developer-owned properties in question lie outside the rail's current truncated scope of work, which ends at the planned Civic Center Station at Halekauwila and South streets.

Under Mayor Rick Blangiardi's administration, the city in 2022 postponed the last 1.25 miles of guideway and the final two stations at Kakaako and Ala Moana to reduce the project's expenses to a nearly $10 billion, 18.9-mile rail line project and 19 stations from over $12.45 billion for a 20-mile route and 21 stations.