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Court Rules Against Molokai Properties, Ltd. In Utilities Dispute

MPL is held legally responsible for the actions of its utilities. 

County of Maui Press 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.

"I'm pleased that the court has placed the legal responsibility for
this crisis on Molokai Properties, Ltd, where it rightly belongs," said
Mayor Charmaine Tavares. "By hiding behind the legal fiction that MPL
and its wholly-owned utilities were separate corporations, MPL was
trying to free itself from the utilities' liabilities while keeping
all of its valuable assets. The Department of Health's hearings
officer saw through this scheme, and his ruling has now been upheld by
the First Circuit Court."

"The Molokai community has had to endure so much when the utilities
walked away from their responsibility," said Council Chair Danny Mateo
who also holds the Molokai seat on the County Council. "I appreciate
the hard work and determination of our legal team to pierce the
corporate veil of Molokai Properties."  

The Department of Health was represented by Deputy Attorney General
Edward Bohlen, while the County of Maui was represented by Deputies
Corporation Counsel Jane Lovell and Edward Kushi, Jr. and by Margery
Bronster, John Hoshibata, and Jeannette Castagnetti of the Honolulu law
firm of Bronster Hoshibata. Honolulu attorneys James Duca and Malia
Schreck represented MPL.


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