One Who Deals With Government Agents Assumes the Risk that the Agents Act within the Bounds of Their Authority

The Maui Vacation Rental Association’s (“MVRA”) members, who operate transient vacation rentals (“TVRs”), were assured by a previous Maui County administration that they could continue to operate their TVRs without seeking permits required under county law until the County adopted new TVR regulations.  Years later, Council had not adopted new TVR regulations, illegal TVRs proliferated, and the new administration decided to enforce the law as it received complaints from neighbors affected by the illegal TVR operations. 

The MVRA sued the County of Maui in US District Court.  See Federal Suit Filed Against Maui County to Stop it from Enforcing TVR Zoning Laws.  MVRA lost its District Court suit and appealed to the 9th Circuit Court of appeals.  See Maui Transient Vacation Rental (“TVR”) Suit Dismissed in Federal Court.

On December 10, 2008, the 9th Circuit issued its decision in Maui Vacation Rental Association vs. County of Maui, ruling in the County’s favor.  See Unpublished Memorandum.  The MVRA appealed the “the district court’s dismissal (without leave to amend) of its 42 U.S.C. § 1983 due process claim, and its equitable estoppel claim[.]”

Regarding its due process claim, the court held that “[t]he district court properly dismissed MVRA’s claims, because MVRA cannot prove a set of facts in support of its claims that would entitle its members to relief.”  The basis for its decision was the principle that “property interests arise only when the state law ‘truly ma[kes] [conferral of the benefit] mandatory.’”  Therefore, even if MVRA properly raised its “official assurances” argument, MVRA could not cite any Hawaii case or statutory law that supports a legitimate claim to its asserted entitlements; i.e., “that its members have both (1) the right to operate transient vacation rentals (“TVRs”) without required permits while Maui County processes permit applications and (2) the right to have Maui County indefinitely maintain its enforcement by complaint policy.”

Regarding MVRA’s estoppel claim, the court started with the definition of equitable estoppel as articulated in Life of the Land, Inc. v. City Council of City & County of Honolulu, 606 P.2d 866, 902 (Haw. 1980); i.e., “[e]quitable estoppel protects a developer’s change of position resulting from a ‘substantial expenditure of money in connection with his project in reliance . . . on official assurance . . . that necessary approvals will be forthcoming in due course, and he may safely proceed with the project.’”  In this case, the court held that MVRA members did not receive “official” assurances under Hawaii law, because “(1) government agents ‘must act within the bounds of their authority,’ and ‘one who deals with [government agents] assumes the risk that [the agents] are so acting’”, and (2) “MVRA members operating TVRs without permits were on notice that their conduct was unlawful and that Maui County retained discretionary authority to enforce the permit requirement.”