Friday, August 14th, 2009
MPL is held legally responsible for the actions of its utilities.
County of Maui Press Release
FOR IMMEDIATE RELEASE
August 13, 2009
The First Circuit Court ruled on July 15, 2009 that Molokai Properties,
Ltd. (MPL) is legally responsible for the actions of the Molokai utility
companies whose stock MPL owns. The appeal arose out of MPL's threat
last year to shut down water and wastewater utilities providing service
to some 1,200 Molokai residents.
On May 8, 2008, MPL notified the State Department of Health that MPL
would not continue to operate water and wastewater utility systems in
Molokai beyond August 2008. On July 21, 2008, the Director of the State
Department of Health initiated administrative proceedings against MPL
and the utilities to avoid a public health crisis that would have
occurred if MPL had made good on its threat. MPL responded by claiming
that the Department of Health did not have any jurisdiction over MPL
because MPL was merely a stockholder in the utility companies. After an
evidentiary hearing, in which the County of Maui participated as an
intervenor, the Department of Health's hearing officer ruled that
although they had been set up as separate corporations, the utilities
and MPL were ignoring the necessary corporate formalities and were
operating essentially as one company controlled by MPL. As a result, MPL
could be held legally responsible for the actions of the utilities. The
hearing officer's decision was based on an "alter ego" theory,
sometimes known as "piercing the corporate veil."
MPL appealed the hearing officer's ruling that MPL was the alter ego
of the utilities. The appeal was assigned to Judge Eden Elizabeth Hifo
of the First Circuit Court and following oral arguments on July 15,
2009, Judge Hifo ruled in favor of the State and the County, and against
MPL. Judge Hifo held that no due process rights of MPL had been
violated, and she affirmed the hearings officer's rulings on the alter
ego issue.
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