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                                                               Electronically Filed
                                                               Supreme Court
                                                               SCAP-XX-XXXXXXX
                                                               30-JUN-2020
                                                               10:12 AM




            IN THE SUPREME COURT OF THE STATE OF HAWAII

                                 ---o0o---


       LEONA KALIMA; DIANE BONER; RAYNETTE NALANI AH CHONG,
  special administrator of the estate of JOSEPH CHING, deceased;
       CAROLINE BRIGHT; DONNA KUEHU; IRENE CORDEIRO-VIERRA;
     and JAMES AKIONA, on behalf of themselves and all others
                        similarly situated,
              Plaintiffs-Appellees-Cross-Appellants,

                                     vs.

   STATE OF HAWAII; STATE OF HAWAII DEPARTMENT OF HAWAIIAN HOME
LANDS; STATE OF HAWAII HAWAIIAN HOME LANDS TRUST INDIVIDUAL CLAIMS
       REVIEW PANEL; DAVID Y. IGE, in his official capacity
                as Governor of the State of Hawaii,
              Defendants-Appellants-Cross-Appellees.


                             SCAP-XX-XXXXXXX

        APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
              (CAAP-XX-XXXXXXX; CIV. NO. 99-4771-12)

                               JUNE 30, 2020

     RECKTENWALD, C.J., NAKAYAMA, POLLACK, AND WILSON, JJ.,
    AND CIRCUIT JUDGE VIOLA, IN PLACE OF McKENNA, J., RECUSED

                 OPINION OF THE COURT BY NAKAYAMA, J.
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                            I.   INTRODUCTION

          In 1990, Senator Michael Crozier observed, “[b]oth the

length of the list and the length of the wait make the vast

majority of Native Hawaiian people despair of ever receiving an

award of land.”    Senator Michael Crozier, Testimony Before the

Hawaii Advisory Committee, United States Commission on Civil

Rights (Aug. 2, 1990).     In the thirty years since Senator

Crozier’s statement, the State of Hawaii has done little to

address the ever-lengthening waitlist for lease awards of

Hawaiian home lands.

          In light of the Circuit Court of the First Circuit’s

(circuit court) 2009 ruling that the State breached its duties

as trustee of the Hawaiian Home Lands Trust (the Trust), we are

now tasked with reviewing the circuit court’s decision granting

and apportioning monetary damages to those Native Hawaiian

beneficiaries who, as a result of the State’s mismanagement of

the Trust, have languished on the waitlist – some for decades.

          Constrained by the provisions of Hawaii Revised

Statutes (HRS) Chapter 674 (Supp. 1991), entitled “Individual

Claims Resolution Under the Hawaiian Home Lands Trust,” the

circuit court adopted a Fair Market Rental Value model (FMRV

model) by which the circuit court can estimate the actual loss

each individual beneficiary incurred.        The interests of justice

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and the extent of the State’s wrongful conduct support a liberal

interpretation of HRS Chapter 674 and a generous construal of

the circuit court’s damages model.        We hold that the FMRV model

is an adequate method for approximating actual damages.

           For the reasons discussed below, we affirm in part and

vacate in part the circuit court’s January 9, 2018 final

judgment and remand for further proceedings consistent with this

opinion.

                            II.    BACKGROUND

           Plaintiffs-Appellees Cross-Appellants Leona Kalima,

Diane Boner, Raynette Nalani Ah Chong, special administrator of

the Estate of Joseph Ching, deceased, Caroline Bright, Donna

Kuehu, Irene Cordeiro-Vierra, and James Akiona, on behalf of

themselves and all similarly situated (collectively

“Plaintiffs”) are a group of Native Hawaiian Trust beneficiaries

who claim that they incurred damages while on the waitlist to

receive homestead land as a result of breaches of trust duties

by Defendants-Appellants Cross-Appellees the State of Hawaii,

the State of Hawaii Department of Hawaiian Home Lands (DHHL),

the State of Hawaii Home Lands Trust Individual Claims Review

Panel (the Panel), and Governor David Y. Ige (collectively “the

State”).   Both Plaintiffs and the State appealed the circuit

court’s January 9, 2018 final judgment.

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A.   Trust History

            In 1920, Congress enacted the Hawaiian Homes

Commission Act (HHCA), which created a land trust intended to

rehabilitate displaced Native Hawaiian people by enabling them

to lease residential, agricultural, or pastoral homestead land

from the Trust for one dollar per year.           Kalima v. State (Kalima

I), 111 Hawaii 84, 87, 137 P.3d 990, 993 (2006); Hawaiian Homes

Commission Act, ch. 42, sec. 207, 42 Stat. 108, 48-49 (1920).

When the Territory of Hawaii became a state in 1959, the State

took over the management and disposition of the Trust.              Kalima

I, 111 Hawaii at 87, 137 P.3d at 993.          In the years that

followed, the State struggled to carry out its duties and

obligations as trustee.       The State began efforts in 1983 to

resolve issues relating to the HHCA and to the Trust.              Id. at

87-88, 137 P.3d at 993-94.

            In 1988, the Hawaii State Legislature (the

Legislature) passed “The Native Hawaiian Judicial Trusts Relief

Act,” which provided for limited waiver of the State’s sovereign

immunity to enable beneficiaries of the Trust to bring suits for

past breaches of the Trust and prospective suits for damages

related to breaches of the Trust after 1988.            Id. at 88, 137

P.3d at 994; 1988 Haw. Sess. L. Act 395, § 3 at 945.

            In 1991, the Legislature passed the “Individual Claims
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Resolution Under the Hawaiian Home Lands Trust Act.”           1991 Haw.

Sess. L. Act 323, § 1 at 990 (Act 323).         Act 323 was codified as

HRS Chapter 674.    HRS Chapter 674 established a process for

resolving claims for damages by individual beneficiaries of the

Trust caused by the State’s breaches of the Trust which occurred

between August 21, 1959, and June 30, 1988.          HRS § 674-1 (1993).

We described the process for resolving claims under HRS Chapter

674 as follows:

                Chapter 674 authorizes the Panel to review and evaluate
          the merits of claims brought by individual beneficiaries,
          render findings, and recommend monetary damages and other
          relief. HRS § 674-1. After reviewing an individual’s
          claims, the Panel is then required to render an advisory
          opinion to the legislature regarding the merits of each
          claim, including an “estimate of the probable compensation or
          any recommended corrective action for legislative action[.]”
          HRS § 674-1(c).

Kalima I, 111 Hawaii at 90, 137 P.3d at 996.

          Part III of Chapter 674, entitled “Judicial Relief for

Retroactive Claims by Individual Native Hawaiians,” provides,

          [t]he State waives its immunity from liability for actual
          damages suffered by an individual beneficiary arising out of
          or resulting from a breach of trust or fiduciary duty, which
          occurred between August 21, 1959, to June 30, 1988, and was
          caused by an act or omission of an employee of the State in
          the management and disposition of trust resources.

HRS § 674-16 (1993) (emphasis added).        Chapter 674 defines

“actual damages” as

          direct, monetary out-of-pocket loss, excluding noneconomic
          damages as defined in section 663-8.5 and consequential
          damages, sustained by the claimant individually rather than
          the beneficiary class generally, arising out of or resulting
          from a breach of trust, which occurred between August 21,
          1959, and June 30, 1988, and was caused by an act or omission
          by an employee of the State with respect to an individual
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            beneficiary in the management and disposition of trust
            resources.

HRS § 674-2 (1993).

            Meanwhile, the State was taking steps to better

perform its duties as trustee by recovering alienated land and

compensating the Trust for non-beneficiary use of that land.                  In

1994, with the passage of Act 352, the State transferred 16,518

acres of trust lands from the Department of Land and Natural

Resources (DLNR) to DHHL and paid DHHL $12 million for

uncompensated use of those lands.

B.   1999 Litigation

            On December 29, 1999, representative plaintiffs Leona

Kalima, Diane Boner, and Joseph Ching filed a class action

complaint against the State alleging breaches of the HHCA’s

trust obligations between 1959 and 1988 and claiming that the

plaintiffs were entitled to damages under HRS Chapter 674.

            On August 29, 2000, following Plaintiffs’ motion for

class certification as to Count I of the Plaintiffs’ complaint,

the circuit court1 entered an order granting the motion and

defining the class in Count I:

            All Hawaiian home land trust beneficiaries who timely filed a
            claim with the Hawaiian Home Lands Trust Individual Claims
            Review Panel, gave notice of intent to sue by October 1, 1999
            and filed suit by December 31, 1999, excluding any
            beneficiaries whose claims were either approved by the
            Legislature or settled.


      1    The Honorable Victoria S. Marks presided.
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The circuit court also granted Plaintiffs’ motion for partial

summary judgment as to Count 1.

            The State brought an interlocutory appeal of the circuit

court’s order granting partial summary judgment before this

court.     Kalima I, 111 Hawaii 84, 137 P.3d 990 (2006).           In Kalima

I, this court held that sovereign immunity did not bar

Plaintiffs’ right to sue under HRS Chapter 674.             Id. at 112-13,

137 P.3d at 1018-19.        This court affirmed in part and vacated in

part the circuit court’s 2001 judgment, and held:

             (1) [we] affirm the circuit court’s determination that the
             plaintiffs are entitled to pursue their claims under HRS
             chapter 674; (2) [we] reverse the circuit court’s
             determination that Act 14 is a settlement agreement and that
             the plaintiffs have a right to sue under HRS chapter 661; and
             (3) [we] remand this case to the circuit court for further
             proceedings consistent with this opinion.

Id.

             In addition, this court held that Chapter 674 should

be “liberally construed to suppress the perceived evil and

advance the enacted remedy” and should not be narrowly

interpreted to “impede rather than advance the remedies”

provided by the statute.         Id. at 100, 137 P.3d at 1006 (quoting

Flores v. United Air Lines, Inc., 70 Haw. 1, 12, 757 P.2d 641,

647 (1988)).

C.    Post-Kalima I Litigation

             The subject of this appeal is the litigation that

followed this court’s holding in Kalima I that Plaintiffs were

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 permitted to sue for damages under HRS Chapter 674.

          1.   Class Certification on Liability

                Following Kalima I, Plaintiffs moved for certification

 of various subclasses on the issue of liability (Motion for

 Class Certification on Liability).            The circuit court granted

 the Motion for Class Certification on Liability on June 6, 2007

 and certified the following subclasses for purposes of liability

 – Subclass 1: Waiting List Subclass, Subclass 2: Ultra Vires

 Qualifications Subclass, Subclass 3: Uninhabitable Awards

 Subclass, Subclass 4: Lost Application Subclass2, Subclass 6:

 Successor Rights Subclass.           The circuit court defined the

 waitlist subclass as “[a]ll Chapter 674 plaintiffs who were on

 the [DHHL] waiting list for a homestead and who submitted a

 claim to [the Panel] because they were not awarded a homestead

 in a prompt and efficient manner.”            The waitlist subclass

 comprised 65.9% of the total class members.

          2.   Liability Trial

                The circuit court conducted a five-week trial on

 liability3 from August 4, 2009 to September 11, 2009, during

 which, as the circuit court stated in its ensuing liability



      2        The circuit court did not certify a “Subclass 5.”

      3     On October 2, 2007, the circuit court granted in part and denied in
part Plaintiffs’ Motion to Bifurcate and ordered that it would try the waitlist
subclass’s liability case only.
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order, “the parties litigated whether any of the trust breaches

found by the court were a legal cause (a substantial factor) in

waitlist applicants experiencing compensable harm (out-of-pocket

expenses) through the failure or inordinate delay in receiving

homestead awards of any kind.”

          At the liability trial, former DHHL deputy director

Benjamin Henderson (Henderson) testified about the process for

awarding homesteads.     Henderson testified that in order to

qualify to apply for a homestead, a person must show only that

the person is over 18 years of age and meets the Native Hawaiian

Qualification, i.e., that he or she is at least fifty percent

Native Hawaiian.    According to Henderson, a person need not show

any financial information to qualify to apply for a homestead.

          Henderson stated that when homestead lands are

developed, DHHL sends an “orientation notice” to many applicants

on the waitlist.    Henderson testified that the orientation

notice invites recipients to an orientation meeting and may

indicate that at some point the applicant might need to meet

other requirements to receive a homestead.         If the applicant

does not respond or responds indicating that the applicant is

not interested, the applicant is “deferred” from receiving a

homestead in that round of offerings, but does not lose their

place on the waitlist.


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            At the orientation meeting, the applicant is given

more information about the particular homesteads available and

may be informed that the applicant will need to financially

qualify to be “invited to participate in the offering,” i.e., to

lease the homestead.      Often, lenders attend orientation meetings

to enable applicants to determine if they will be able to meet

the financial qualification requirements.

            If an applicant expresses interest in obtaining a

homestead, attends the orientation meeting, and is able to show

that they meet the financial qualification requirements, the

applicant will be “invited to participate in the offering,”

select an available lot, and begin to lease it.

            Henderson also gave a deposition, the following

testimony from which was read into the record at trial on August

14, 2009:

            Question:

            . . . .

                  What is DHHL’s position on [what constitutes placement
            on the land in a prompt and efficient manner, specifically,
            the number of years between an application and an award]?

            Answer: DHHL’s position is that certainly, again, assuming
            you had the resources available to them, the normal
            development process is probably five to six years. I mean,
            that’s not, you know – I mean, yeah, you talk to any
            developer in the private market, in the private sector, they
            would probably tell you the same thing.
            I mean, planning, permitting, engineering plans, offsite,
            onsite construction, et cetera, home reconstruction, we are
            looking at a period of five to six years.



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     3.   Liability Order

           On November 3, 2009, the circuit court issued a

decision regarding liability and causation (Liability Order).

In the Liability Order, the circuit court found that the State

breached the following four duties as trustee during the claims

period: (1) the duty to keep and render accounts; (2) the duty

to exercise reasonable care and skill; (3) the duty to

administer the trust; and (4) the duty to make the trust

property productive.     The circuit court specifically found that

the State breached the Trust as follows:

           Defendant State’s failure for 25 years (1959-1984) to correct
           its own and the predecessor trustees’ illegal “set asides” by
           cancellation or withdrawal of those executive orders or
           proclamations together with Defendant State’s failure
           throughout the claims period to restore lands to the trust
           and to compensate the trust for fair rent during the period
           of non-beneficiary State use of trust lands were breaches of
           trust and trust duties as set forth in Sections 170, 174,
           175, 176, 177, 179, 181, 223 [of the Restatement (Second) of
           Trusts].

The circuit court also found that “[t]he State’s witness Mr. Ben

Henderson, former deputy of DHHL, credibly testified that the

normal site development time is 5 to 6 years and that would be

the logical, optimal waiting list time for eligible applicants.”

           The circuit court concluded:

           Plaintiffs have proven by clear and convincing evidence
           breaches of trust by Defendants State and DHHL during the
           claims period and that the individual and/or cumulative
           effects of such breaches caused by acts or omissions by
           employees of the State in the management and disposition of
           trust resources were a legal cause of harm to the Plaintiffs
           herein which are compensable as defined by Sections 674-1, -
           17 of Hawaii Revised Statutes, thus necessitating further

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             proceedings to determine the amount of damages, if any, each
             subclass member proves s/he sustained as a result of the
             breaches during the claim period.

 In other words, the Liability Order determined liability,

 causation, and the fact of damages, but specifically identified

 the need for further proceedings to determine the amount of

 damages.

       4.   Motions on Methods for Calculating Damages

             In March 2011, the parties filed simultaneous motions

 proposing distinct methods for calculating damages.

             The circuit court4 rejected both models and ordered

 Plaintiffs and the State to submit new damages model proposals.

             The parties filed new motions on July 22, 2011.            The

 Plaintiffs proposed calculating the FMRV of an improved

 residential homestead, adjusted for inflation.            This proposal

 conformed each class member’s loss to the lost value of a

 developed residential lot.        As a secondary option, Plaintiffs

 proposed that claimants whose individual damages extended beyond

 the base amount could show out-of-pocket expenses (the cost of

 replacement leases obtained in the area in which they resided).

             The State proposed a four-step model which was

 substantially the same as the model the circuit court had

 previously rejected.


       4    The Honorable Virginia L. Crandall presided over all damages model
litigation from this point forward.
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    5.   January 24, 2012 Order Re Parties’ Damages Models

          On January 24, 2012, the circuit court entered an

order granting in part and denying in part Plaintiffs’ and the

State’s motions to adopt damages calculation models (Order Re

Parties’ Damages Models).      Based upon the November 3, 2009

Liability Order’s finding that “normal site development time is

5 to 6 years,” the circuit court found that damages did not

begin to accrue until six years after a plaintiff was placed on

the waitlist.

          The circuit court also ordered the parties to present

new motions on the “individualized circumstances” that the

parties wished to raise, which could be determined on a class-

wide basis.     These “individualized circumstances” included “a

subclass member’s deferring or rejecting lease offerings or

opportunities, a subclass member’s financial ability or

qualifications, date of application, or DHHL policies and rules

including any applicable priorities.”

          Finally, the circuit court ordered that “after

resolution of the [individualized circumstances] motions . . .

the Court will determine the model to be used to calculate

damages and whether referral to a Special Master to make such

calculations is appropriate.”

          On February 10, 2012, Plaintiffs filed a Motion for


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 Partial Summary Judgment arguing that “‘deferred status’ imposed

 by DHHL is not a bar to damages in this case, or alternatively

 that DHHL must prove it strictly followed its regulations before

 it can invoke ‘deferred status’ as a defense to damages.”

             That same day, the State filed two motions “for

 adoption of specific rules to govern computation of damages.”

 The State proposed twenty-four “rules”5 which limited or barred

 certain claimants’ damages.

             The circuit court resolved those motions, in pertinent

 part, as follows.

       6.   February 4, 2013 Order Re Financial Qualification
            Requirements

             On February 4, 2013, the circuit court denied

 Plaintiffs’ 2012 Motion for Partial Summary Judgment on

 Financial Qualification Requirements Imposed on Beneficiaries

 Seeking Homestead Awards (Order Re Financial Qualification

 Requirements) and ordered that if a claimant was deferred due to

 financial disqualification, the State could present evidence of

 that deferral to limit the claimant’s damages period.

             In the same order, the circuit court ruled:

                  Defendant’s motion to adopt proposal number 4, “A
             claimant is barred from obtaining any damages for any period
             of time during which he or she would have turned down a
             homestead offer for any reason at all,” is GRANTED IN PART
             AND DENIED IN PART, AS FOLLOWS: If an offering of a homestead


       5    The circuit court later referred to the State’s proposed rules as
both “rules” and “proposals.”
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          lease was made to a member of the Waiting List Damages
          Subclass and the member declined that offering, then the
          member is barred from recovering damages from that time
          forward.

The circuit court also ordered that “Waiting List Damages

Subclass members bear the burden of proving the amount of their

damages, utilizing the damages model ultimately adopted for the

Waiting List Damages Subclass by the Court.”

    7.   February 14, 2013 Order Re FMRV Damages Model

          On February 14, 2013, the circuit court entered an

Order Granting in Part Plaintiffs’ Second Motion to Determine

What Model Should Be Used to Establish the Amount of Damage

Class Members Suffered as a Result of the Breaches Committed by

Defendants (Order Re FMRV Damages Model).         The Order Re FMRV

Damages Model detailed, in four parts, the FMRV-based damages

model that would be used to calculate damages.

          The circuit court ordered that (1) the model should

measure annual FMRV for comparable land; (2) damages would begin

to accrue six years after the date the claimant’s application

was accepted by DHHL and end on the date of award or date of

trial, whichever is earliest; (3) damages would be discounted by

the one dollar annual rental payment; and (4) class members were

provided with an alternative option “to prove his/her actual

direct monetary out of pocket expenses exceeded fair market

rental value,” in lieu of accepting damages produced by the

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following formula:

          a.   Based upon available data sources and other evidence,
          including, but not limited to (a) evidence of actual sales of
          homesteads; (b) evidence of valuation of homestead lots
          determined by the Department of Hawaiian Home Lands, if any;
          (c) sales data of comparable fee lots (residential,
          agricultural, and pastoral)[;] and (d) actual rental values
          of comparable lots, which could be used to determine the fair
          market rental value of the three types of DHHL leasehold
          lots, a model or models will be developed to help determine
          damages based upon fair market rental value of such lots from
          1960 to the present (the “Damages Period”). The Court,
          however, need not consider each factor listed above if it
          finds them to be irrelevant or unnecessary.

          b.   Fair market rental values will be calculated on a class-
          wide basis using the following procedure:

                i.   First, calculate the market value of comparable
          lots (residential, agricultural and pastoral), exclusive of
          residences or other structures, in specified locations as of
          1960 based upon the above available data sources and
          evidence, and based upon that evidence, estimate fee simple
          values for each type of homestead lot.

                ii[.]      Second, based upon relevant real estate
          data, compute the estimated fee simple value of the lots for
          each year of the Damages Period, including, without
          limitation, referring to empirical data (including market
          sales) at various points in time, including regression
          analysis to fill in missing data points.

                iii.       Third, calculate annual fair market rental
          values from the fee simple values based upon a methodology
          the Court determines is most accurate, after reviewing the
          evidence and the testimony or declarations of the parties’
          experts.

                                         OR

          in lieu of first calculating fee simple values and converting
          them as prescribed in paragraphs (i)-(iii), calculate the
          annual fair market rental values for each year directly from
          rental values of comparable lots, and other relevant
          evidence, including regression analysis to fill in missing
          data points.




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                iv. Fourth, subject to applicable defenses, compute
          the potential loss to each claimant based upon the time
          period running from six years after a beneficiary’s
          application was accepted by DHHL until a homestead award was
          made, or date of trial. Specifically: (1) the annual fair
          market rental value for each year would be computed,
          beginning six years from the date the application was
          received; (2) then $1 for each year of homestead rent a
          homesteader would have paid would be subtracted; and (3) the
          losses for each year then would be summed.
                Any applicable defenses may limit the years to be
          summed.

          c.   For Oahu residential lease applicants, fair market
          rental values will be calculated on a class-wide basis using
          the following procedure:

                i.   Fee simple values, or annual fair market rental
          values (depending upon methodology chosen), for sales or
          leases of a 5,000 square foot lot (or other appropriate size)
          in Maili (or other appropriate homestead area), will be used
          to establish the annual fair market rental value of an
          improved residential homestead lot on Oahu during each year
          of the Damages Period . . . .

          d.   A plaintiff may choose to prove his/her actual direct
          monetary out of pocket expenses exceeded fair market rental
          value, and may submit additional individual proof of actual
          direct monetary out of pocket expenses for the period of
          loss, and add that additional increment to fair market rental
          value (minus $1), subject to Defendants establishing defenses
          or mitigation.

(Some emphases added; some formatting altered.)

          In the Order Re FMRV Damages Model, the circuit court

also granted or denied several of the rules that the State

proposed in its “individualized circumstances” motions.

          First, the circuit court ruled,

          Defendants’ proposed rule 5: “A claimant is barred from
          obtaining any damages for any period of time during which he
          or she did not spend any money directly out of pocket on
          alternative land,” is GRANTED. HRS §§ 674-2 & -16 require
          proof of direct monetary out of pocket loss by Plaintiffs.

          Second, the circuit court ruled,

           Defendants’ proposed rule 6: “A claimant is barred from

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           obtaining any damages for any portion of out of pocket
           rental or other payments attributable to houses or other
           structures on alternative land. Damages must be restricted
           to only the portion of out of pocket rental payments
           attributable to the land alone,” is GRANTED, based on the
           court’s understanding that Plaintiffs’ model is based on
           rental value of the land only, exclusive of value or
           expenses incurred for residences or other structures.

          Third, the circuit court ruled,

          Defendants’ proposed rule 7: “A claimant buying rather than
          renting alternative land, shall not be awarded damages for
          her mortgage payments (or down or cash payments), but only
          what it would cost to rent that land. In addition, any
          increase in the value of the purchased land must be
          subtracted from a claimant’s damages,” is DENIED, WITHOUT
          PREJUDICE, and may be raised on an individual basis by
          Defendants as a defense or as failure to mitigate damages for
          plaintiffs who seek to recover damages in excess of the fair
          market rental value. In addition, Defendants may seek to
          prove as an offset to damages any increase in value of
          purchased (as opposed to rented) alternative land.

 (Emphases in original.)

          Finally, the circuit court ruled,

          Defendants’ proposed rule 8: “If a claimant rents or
          purchases alternative land of a higher quality or value as
          compared with the quality or value of typical or average
          homestead land, her damages must be limited to the rental
          payments on typical or average homestead land,” is DENIED,
          WITHOUT PREJUDICE, and may be raised on an individual basis
          by Defendants as a defense or as a failure to mitigate
          damages for plaintiffs who seek to recover an increment of
          damages in excess of the fair market value of a typical or
          average homestead lot.

In sum, the circuit court largely adopted Plaintiffs’ proposed

FMRV model, but included certain qualifications proposed by the

State which were designed to limit damages to actual damages.

    8.   Trial on Methodological Issues Regarding FMRV Model

          Between October 1, 2013, and October 3, 2013, a three-

day trial took place on methodological issues to determine how


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 to calculate the FMRV.       Essentially, the circuit court sought a

 statistical model that would derive the rental value of the

 Maʿili lot from the fee simple value of the lot over time.

             Plaintiffs’ expert Andrew Rothstein (Rothstein) and

 the State’s expert James Hallstrom, Jr. (Hallstrom) testified

 that different methodologies could be used to derive the rental

 values of a given lot.       Based on the circuit court’s February

 14, 2013 Order Re FMRV Damages Model, which stated,

             [f]ee simple values, or annual fair market rental values
             (depending upon methodology chosen), for sales or leases of a
             5,000 square foot lot (or other appropriate size) in Maili
             (or other appropriate homestead area), will be used to
             establish the annual fair market rental value of an improved
             residential homestead lot on Oʿahu during each year of the
             Damages Period[,]

 the experts demonstrated how their proposed methodologies

 derived rental values from the 5,000-square-foot Maʿili lot.

             The experts proposed three methodologies that could be

 used to calculate annual fair market rental values: (1) the

 market value curve; (2) the compound curve; and (3) the best fit

 curve.6    At trial, Hallstrom described the best fit curve as

 follows:

                   The best fit curve is a mathematical equation we used
             in Excel, a computer program, in which we entered all of the
             122 sales. We entered the dates in which they occurred. And
             we determined the exponential curve that best fit all of the
             data.
                   [T]here’s a – there’s a test or an indication called a

       6    These methodologies are referred to interchangeably in the record as
“curves” and “models.” The selected curve or model provides the basis for
calculating fair market rental value and is only one part of the circuit court’s
overall damages model.
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          coefficient, a confidence coefficient, and it tells you how
          accurate that is. And in this case, it was .8, meaning that
          it has a reasonably high level of confidence and pretty well
          explains the variance throughout the period and is – we would
          consider it very reliable if you were looking for the point
          of central tendency trend through the study period.

          . . . .

                As there are changes in the market, the best fit curve
          – once you have all of the transactions plotted, the best fit
          curve basically goes between all of those data points to best
          explain them. It doesn’t necessarily start off at the very
          first point, and it doesn’t necessarily end at the very last
          point, but it best explains what’s happening during the
          period.

Hallstrom opined that the market value model is the most

accurate model, followed by the best fit model.          Hallstrom

stated, however, that a disadvantage of the market value model

is that it creates the potential for wide disparity in

individual damages based on market fluctuation.          Hallstrom

testified that, unlike the market value model,

          [the best fit model] gives you the overall central tendency
          of exactly where the market is, but without the spikes in the
          market that are the natural phenomena of the real estate
          market. So at least it measures the growth and gives you a
          consistent application of what actually happened when you
          look at all of the transactions.

    9.   Adoption of the Best Fit Curve

          On October 7, 2014, the circuit court issued a Trial

Order (October 7, 2014 Trial Order) in which, in its discretion

as finder of fact, it adopted the best fit model.

          IT IS HEREBY ORDERED, ADJUDGED AND DECREED that for purposes
          of calculating damages for claimants who applied for Oahu
          residential leases under the February 14, 2013, Order, the
          “Best Fit” model as set forth in Exhibit D-40 shall be used
          to determine the fee simple values to calculate annual fair
          market rental values. This model comprises (i) annual rental
          values based on four percent (4%) of the fee simple value of
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             the land area of a 5,000 square foot lot in Maili for any
             given year; (ii) rents adjusted annually; and (iii) a “best
             fit” model derived from actual fee simple Maili valuations
             from 1959 through July 8, 2013 (as shown on Exhibit D-2);
             (iv) with no increases for the consumer price index (“CPI”)
             or present value adjustments.

 Also in the October 7, 2014 Trial Order, the circuit court ruled

 that the damages model does not provide for “increases for the

 consumer price index (“CPI”) or present value adjustments.”

             At a September 18, 2015 hearing, the circuit court

 orally ruled that the Oahu residential best fit model would be

 applied to the residential homesteads across the entire state.

 The circuit court entered an order pursuant thereto on September

 22, 2016, which stated, “the Best Fit model adopted in this

 Court’s October 7, 2014 Trial Order [] shall be used to

 calculate annual fair market rental values used to calculate

 damages for all claimants who applied for residential leases on

 Hawaii, Kauai, Lanai, Maui, and Molokai.”

             In other words, the circuit court ruled that the best

 fit model, which is based on a 5,000-square-foot lot in Maili7

 on Oahu, would be used as the basis for residential homestead

 claimants’ damages statewide.




       7    Plaintiffs assert that “the 5,000 square foot lot in Maili was
selected because it was the most conservative value of an Oahu residential
lot[.] [C]ompared . . . to other locations like Waimanalo and Papakolea this was
the most conservative value to determine what the fair market value will
ultimately be.”
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     10. Order Re Damages Computation

            On July 26, 2017, the circuit court issued an Order

Granting in Part and Denying in Part Plaintiffs’ Motion for

Summary Judgment to Compute the Amount of Damage for Waiting

List Subclass Oahu Residential Group A (Order Re Damages

Computation).    In that order, the circuit court found that a

subclass member’s duty to mitigate damages did not arise until

1995, the deadline for a beneficiary to file a claim with the

Panel under HRS § 674-7.      The circuit court also found that

damages are suspended from the date that the applicant was

“deferred” from the homestead offering to the date of the first

lease awarded for the offering from which the applicant was

deferred.    However, subclass members may “prove by rebuttal

evidence that mitigation was excused because the claimants self-

selected out for financial reasons or did not participate for

other reasons that would excuse their duty to mitigate.”            Put

differently, the circuit court ruled that if a claimant was

forced to self-select out of the offering because the claimant

was not financially qualified to accept an offering, the

claimant’s failure to mitigate was excused.

     11. Order Re Native Hawaiian Blood Quantum

            On June 19, 2017, the circuit court issued an Order

Granting in Part and Denying in Part the State’s Cross-Motion to

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 Establish Procedures and Legal Evidence for Confirming Native

 Hawaiian Blood Quantum for Waiting List Damages Subclass Members

 (Order Re Native Hawaiian Blood Quantum).           The circuit court

 ordered, “[t]o receive an award for damages, Waiting List

 Damages Subclass members must meet the [Native Hawaiian

 Qualification8] requirement and must demonstrate through evidence

 in this case that they applied for a homestead lease and were on

 the waiting list.”

      12.   Order Re Claims Administration Process

             On July 26, 2017, the circuit court issued an Order

 Granting Plaintiffs’ Motion to Establish Claims Administration

 Process to Resolve All Claims (Order Re Claims Administration

 Process).    The Order Re Claims Administration Process

 established a claims administration process to calculate

 specific damages awards and ordered that a Special Master

 supervise the claims administrative process.           The circuit court

 explained,

             [t]he Special Master shall supervise the Claims
             Administration Process and have authority to appoint a Claims
             Administrator to perform the ministerial work of processing
             all Waiting List Damages Subclass members’ damages claims.
             The Special Master shall resolve any disputed legal or
             factual issues, which then may be appealed to the Court.

 The circuit court ordered that the Special Master’s duties would


       8    The Native Hawaiian Qualification provides that an applicant is
“native Hawaiian” if the applicant is “any descendant of not less than one-half
part of the blood of the races inhabiting the Hawaiian Islands previous to
1778.”
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include, among other things,

          2.    Receiv[ing] all proofs of claim from members of the
                Waiting List Damages Subclass;
          3.    Determin[ing] whether claimants meet the criteria to
                qualify as a member of the Waiting List Damages
                Subclass;
          4.    Rul[ing] on discovery requests and disputes between the
                parties;
          5.    Conduct[ing] evidentiary hearings on claims, if
                necessary; [and]
          6.    Calculat[ing] damages, if any, for any individual
                member of the [subclass] according to the rules,
                valuation methods and applying any defenses established
                by the Court.

The circuit court ordered that each Waitlist Subclass member

must submit a “Claim Form” demonstrating their prima facie right

to damages.    The Claim Form requires disclosure of the date each

claimant submitted a homestead application, evidence of each

claimant’s Native Hawaiian Qualification, confirmation of prior

homestead awards, the time period during which each claimant

paid to rent alternative land, and each claimant’s marital

status.

          The circuit court ruled that after each claimant

submitted their Claim Form, the State was required to disclose

its affirmative defenses, if any, and identify and produce all

evidence in support of its defenses to each claimant’s prima

facie case.

    13. HRCP Rule 54(b) Final Judgment

          On January 9, 2018, the circuit court entered an HRCP

Rule 54(b) final judgment as to the waitlist subclass’s claims.


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The circuit court ordered:

            1. All claims of the Waiting List Subclass have been decided
            by the Court in favor of the Waiting List Subclass
            Plaintiffs . . . ; and
            2. All claims in the Supplemental Complaint For Waiting List
            Damages [Filed December 19, 2013] regarding the amount of
            damages, if any, each Waiting List Subclass plaintiff
            representative or member is entitled to recover under the
            orders establishing the model, rules, and claims
            administration process previously entered for that purpose,
            have been decided by the Court.
                  In accordance with HRCP Rules 54(b) and 58, the Court
            EXPRESSLY FINDS that there is no just reason for delay and
            EXPRESSLY DIRECTS entry of judgment in favor of the Waiting
            List Damages Subclass. All claims of the Waiting List
            Damages Subclass have been resolved and only ministerial
            functions are necessary to administer those claims.

D.   ICA Proceedings and Subsequent Transfer

            The State filed a notice of appeal on February 6,

2018.    Plaintiffs filed a notice of cross-appeal on February 19,

2018.    Plaintiffs filed an application for transfer to this

court on December 31, 2018, to which the State filed a response

of no opposition.      This court granted Plaintiffs’ application

for transfer on February 5, 2019.

                              IV.    DISCUSSION

            In resolving this case, we bear foremost in mind our

admonition in Kalima I that HRS Chapter 674, a remedial statute,

should be “liberally construed to suppress the perceived evil

and advance the enacted remedy” and should not be narrowly

interpreted to “impede rather than advance the remedies”

provided by the statute.        111 Hawaiʿi at 100, 137 P.3d at 1006

(quoting Flores, 70 Haw. at 12, 757 P.2d at 647).             That is to

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say – it is in the interests of justice to construe HRS Chapter

674 in a manner that permits the advancement of this case to the

final stages of its resolution and to thereby afford a fair

remedy to the beneficiaries who have for decades been deprived

of the opportunity to lease their native land from the State.

A.   The circuit court did not err by adopting the FMRV model.

            The central issue in this case is whether the circuit

court’s FMRV damages model calculates individual damages in a

method permitted by HRS Chapter 674.          Plaintiffs, who proposed a

similar FMRV model in their initial damages model proposal,

assert that the FMRV model does not contravene Chapter 674

because, they argue, “out-of-pocket loss,” as contemplated by

HRS § 674-2, means the value of the lost benefit, i.e., the

value of a homestead.       The State maintains that the FMRV model

contravenes Chapter 674’s “actual damages” requirement, which,

the State argues, limits damages to the amount that subclass

members actually spent to rent alternative land during the

breach-caused delay period.

            Courts often face challenges when attempting to

calculate damages in complicated class action cases.             This

difficulty should not, however, bar recovery for those entitled

to damages, particularly when the difficulty of calculating

damages is compounded by the failures of the wrongdoer.


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          This principle is widely reflected in the common law.

The United States Supreme Court explained that “[w]here the tort

itself is of such a nature as to preclude the ascertainment of

the amount of damages with certainty, it would be a perversion

of fundamental principles of justice to deny all relief to the

injured person, and thereby relieve the wrongdoer from making

any amend for his acts.”      Story Parchment Co. v. Paterson

Parchment Paper Co., 282 U.S. 555, 563 (1931).          The Court

resolved this predicament by holding that, when damages cannot

be measured with exactness due to the nature of the wrongdoer’s

tort, damages may be approximated through “just and reasonable

inference[.]”   Id.; see also Anderson v. Mt. Clemens Potter Co.,

328 U.S. 680, 687 (1946) (where employees could not establish

the time spent doing uncompensated work due to violations by

employers with respect to keeping proper records, the “remedial

nature of [the Fair Labor Standards Act] and the great public

policy which it embodies . . . militate against making” the

burden of proving uncompensated work “an impossible hurdle for

the employee.”).

          This court has long-echoed this concept.           In Coney v.

Lihue Plantation Co., 39 Haw. 129, 136 (Haw. Terr. 1951), this

court explained,

          [t]he damages to be awarded should be such as adequately to
          compensate the actual loss or injury sustained. This is an
          obvious principle of justice from which we see no reason to
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           depart. But in the application of the principle,
           difficulties often arise in ascertaining, with anything like
           accuracy, the actual damages which the plaintiff has suffered
           from the injury; or what sum will produce adequate
           compensation.

We concluded that “[t]he law never insists upon a higher degree

of certainty as to the amount of damages than the nature of the

case admits, and [] where, as here, the fact of damages is

established, a more liberal rule is allowed in determining the

amount.”   Id. at 139.    This is true “particularly where the

uncertainty was caused by the defendant’s own wrongful acts.”

Exotics Hawaii-Kona, Inc. v. E.I. Du Pont De Nemours & Co., 116

Hawaii 277, 292, 172 P.3d 1021, 1036 (2007) (emphasis added).

           We apply the foregoing principle here.          It is

undisputed that the State breached its duties to keep and render

accounts, to exercise reasonable care and skill, to administer

the trust, and to make the trust property productive, to the

significant detriment of the Native Hawaiian people for whom the

Trust was created.    The State’s decision to continue to litigate

this case for decades has compounded the challenges resultant

from its own failure to keep adequate records – many of the

beneficiaries have been unable to keep their own records over

the years, particularly with respect to the amount that they

paid to rent alternative land.

           This court has not previously reviewed a trial court’s


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adoption of a damages calculation methodology.          Both parties

acknowledge, and we agree, that the question of which

methodology best calculates damages is either a question of fact

or a mixed question of fact and law.        In either case, the

circuit court’s adoption of the FMRV model is reviewed under the

“clearly erroneous” standard.       See Bremer v. Weeks, 104 Hawaii

43, 51, 85 P.3d 150, 158 and Amfac, Inc. v. Waikiki Beachcomber

Inv. Co., 74 Haw. 85, 119, 839 P.2d 10, 29 (1992).           A finding of

fact or a finding of fact that presents mixed questions of fact

and law is clearly erroneous when, “despite evidence to support

the finding, the appellate court is left with the definite and

firm conviction in reviewing the entire evidence that a mistake

has been committed.”     104 Hawaii at 51, 85 P.3d at 158.

          The Fair Market Rental Value model does not provide a

perfectly accurate measure of actual damages.          However, the

State has failed to supply a more accurate model.           Moreover, the

State’s own wrongful acts, most notably the State’s failure to

keep adequate records, have brought about the uncertainty of the

actual damages caused by its breaches.         Here, the circuit court,

in its discretion as factfinder, crafted a damages model which

measures actual damages as accurately as is practicable.            We

hold that the circuit court did not clearly err in creating the

FMRV model as the controlling method for calculating damages.

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We affirm in part the circuit court’s Order Re FMRV Damages

Model and hold that the FMRV Model is an adequate method for

estimating actual damages under HRS Chapter 674.

            HRS Chapter 674 clearly limits recovery to actual

damages.    The express purpose of HRS Chapter 674 is to

“provid[e] an individual beneficiary claimant the right to bring

an action to recover actual damages for a breach of trust[.]”

HRS § 674-1(2).       HRS § 674-2 defines actual damages as

            direct, monetary out-of-pocket loss, excluding noneconomic
            damages as defined in section 663-8.5 and consequential
            damages, sustained by the claimant individually rather than
            the beneficiary class generally, arising out of or resulting
            from a breach of trust, which occurred between August 21,
            1959, and June 30, 1988, and was caused by an act or omission
            by an employee of the State with respect to an individual
            beneficiary in the management and disposition of trust
            resources.

HRS § 674-16(a) states that “[t]he State waives its immunity

from liability for actual damages[.]”          HRS § 674-16(a).

            Here, we must reconcile HRS Chapter 674 with the

general rules of class action damages.          The United States

Supreme Court has held that, for purposes of Federal Rules of

Civil Procedure (FRCP) Rule 23(b)(3),9 the common question


     9     FRCP Rule 23(b) provides,

            (b) Types of Class Actions. A class action may be maintained
            if Rule 23(a) is satisfied and if:

            . . . .

                  (3) the court finds that the questions of law or fact
                  common to class members predominate over any questions
                                                                (continued. . .)
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requirement, class action damages must be capable of being

measured across the entire class or subclass.           Comcast v.

Behrend, 569 U.S. 27, 35 (2013).           If no common method can be

established for determining damages, damages assessments may

impermissibly predominate over questions common to the class.

See Id.   FRCP 23(b)(3)’s analogue in the Hawaii Rules of Civil

Procedure (HRCP) is HRCP Rule 23(b)(3).10          Implicit in the Hawaii


                 affecting only individual members, and that a class
                 action is superior to other available methods for
                 fairly and efficiently adjudicating the controversy.
                 The matters pertinent to these findings include:
                       (A) the class members’ interests in individually
                            controlling the prosecution or defense of
                            separate actions;
                       (B) the extent and nature of any litigation
                            concerning the controversy already begun by
                            or against class members;
                       (C) the desirability or undesirability of
                            concentrating the litigation of the claims
                            in the particular forum; and
                       (D) the likely difficulties in managing a class
                            action.

     10   HRCP Rule 23(b) provides,

           (b) Class Actions Maintainable. An action may be maintained
           as a class action if the prerequisites of subdivision (a) are
           satisfied, and in addition:

           . . . .

                 (3) the court finds that the questions of law or fact
                 common to the members of the class predominate over any
                 questions affecting only individual members, and that a
                 class action is superior to other available methods for
                 the fair and efficient adjudication of the controversy.
                 The matters pertinent to the findings include: (A) the
                 interest of members of the class in individually
                 controlling the prosecution or defense of separate
                 actions; (B) the extent and nature of any litigation
                 concerning the controversy already commenced by or
                 against members of the class; (C) the desirability or
                 undesirability of concentrating the litigation of the
                                                               (continued. . .)
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statute, therefore, is the same requirement that class action

damages must be capable of measurement across the entire class.

See Comcast, 569 U.S. at 35.

            The class action damages requirement appears to be at

odds with the definition of actual damages set forth in

HRS § 674-2.    However, as it would be unjust to decline to

apportion damages to injured parties because the wrongdoer’s

tortious action renders actual damages difficult to measure, a

model must be created to reconcile the actual damages definition

with the class action damages requirement.         See Tyson Foods,

Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1046 (2016) (“In a case

where representative evidence is relevant in proving a

plaintiff’s individual claim, that evidence cannot be deemed

improper merely because the claim is brought on behalf of a

class.”).    Put differently, the appropriate damages model must

be designed to calculate actual damages, as required by HRS

Chapter 674, and must enable damages calculation class-wide, as

required by HRCP Rule 23(b).

            This model need not be exact.       “The wrongdoer is not

entitled to complain that [damages] cannot be measured with the

exactness and precision that would be possible if the case,



                claims in the particular forum; (D) the difficulties
                likely to be encountered in the management of a class
                action.
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 which he alone is responsible for making, were otherwise . . .

 the risk of the uncertainty should be thrown upon the wrongdoer

 instead of upon the injured party.”         Story Parchment Co., 282

 U.S. at 563.     Indeed, “[t]he law never insists upon a higher

 degree of certainty as to the amount of damages than the nature

 of the case admits, and where, as here, the fact of damages is

 established, a more liberal rule is allowed in determining the

 amount.”    Coney, 39 Haw. at 139-40.

             The circuit court’s FMRV model envisions calculating

 the fair market rental value on a class-wide basis using a four-

 part procedure.     First, the court will calculate the market

 value of comparable residential, agricultural, and pastoral lots

 and estimate fee simple values for each type of lot.             Second,

 the court will compute the estimated fee simple value of each

 type of lot for each year of the damages period.            Third, the

 court will either calculate annual fair market rental values

 from the best fit curve or calculate annual fair market rental

 values for each year directly from the rental values of

 comparable lots.      Fourth, the court will sum the potential loss

 to each claimant for the time period beginning six years after

 the claimant’s application was accepted by DHHL11 until either a



        11  We vacate the circuit court’s Order Re FMRV Damages Model to the
extent that the FMRV model adopts the “six-year rule.” See infra at section
III(C).
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homestead award is made or until the date of trial.           Each

claimant’s FMRV damages calculation will be subject to

applicable defenses by the State.

           While the FMRV model may not measure actual damages

with exactitude, exactitude is not required under the

circumstances.    The circuit court as factfinder found that the

FMRV model was a reasonable method to determine actual damages

as defined under HRS § 674-2, and we find no basis to interfere

with that determination.      We therefore find no error with the

general method adopted by the circuit court.          As discussed

infra, we hold that the circuit court erred with respect to

specific findings within the Order Re FMRV Damages Model.            We

therefore affirm in part the circuit court’s Order Re FMRV

Damages Model.

     1.   The circuit court did not err in adopting the best fit
          curve.

           The circuit court did not abuse its discretion when it

determined that the best fit curve represents the best way to

calculate the FMRV of the Maili lot.

           Plaintiffs argue that the circuit court improperly

adopted the State’s expert’s best fit damages model because the

model arbitrarily reduces damages for the waitlist subclass.

Plaintiffs allege that both sides’ experts initially agreed that

the market value model will most accurately measure damages.
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According to Plaintiffs, the best fit model proposed by the

State and adopted by the circuit court “is a device used to

eliminate variations in data; it is not an actual measure of

data.”   The best fit model, Plaintiffs assert, reduces damages

for individual class members and aggregate damages for the

subclass as a whole.

          At the 2013 bench trial on damages, Plaintiffs’ expert

Rothstein and the State’s expert Hallstrom stated that different

methodologies can be used to derive the Maili lot FMRV.            The

experts proposed three different methodologies: the market value

curve, the compound curve, and the best fit curve.           Both experts

testified at length about the strengths and limitations of each

methodology.   After the trial, the circuit court, in its

discretion as finder of fact, adopted the best fit curve.

          The issue of which curve best derives the Maili lot

FMRV falls within the question of which methodology best

calculates overall damages.      Therefore, we review the circuit

court’s determination that the best fit model will be used to

calculate damages under the “clearly erroneous” standard.            See

supra p. 29 (citing Bremer, 104 Hawaii at 51, 85 P.3d at 158;

Amfac, 74 Haw. at 119, 839 P.2d at 29).

          The circuit court’s determination that the best fit

curve will be used to calculate damages was not clearly

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erroneous.   According to both parties’ expert testimony, the

market value model is the most accurate model.          However, the

circuit court did not err in selecting the best fit model

because the experts also agreed that there are disadvantages to

using the market value model.       The testimony of both experts

indicated that the market value model creates the potential for

wide disparity in individual damages awards based on

appreciating land values and housing market fluctuations.            As

such, it appears that the best fit model is the second most

accurate of the three models, but that it also best provides for

the calculation of class-wide damages.

           In light of the evidence presented by both parties’

experts on the various potential damages curves, the circuit

court did not clearly err in selecting the best fit curve, which

appears to be less exact but more fair than Plaintiffs’ proposed

market value model.

     2.   The circuit court correctly applied the Oahu FMRV model
          for residential leases to the entire state.

           The circuit court did not err in applying a statewide

measure of residential damages based on a homestead lot in Maili

on the island of Oahu.

           The State argues that the Maili lot is not a fair lot

on which to base class-wide damages because Oahu land values are

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higher than those of neighbor islands.

          Plaintiffs contend that “[t]he court properly

recognized that a statewide damages class requires a statewide

measure of damages” and that, in any case, the State provides no

evidence that Oahu land values are higher than neighbor island

land values.

          Class action damages must be measurable across the

entire class or subclass.      See supra pp. 31-32.      If no common

method can be established for determining damages, damages

assessments may impermissibly predominate over questions common

to the class.   See Comcast, 569 U.S. at 35.

          In order to establish a common method for determining

damages here, the circuit court selected a 5,000-square-foot lot

in Maili as the basis for determining the rental value, of which

claimants were deprived, for each year during the claims period.

          The record reflects that the circuit court chose the

5,000-square-foot Maili lot because Plaintiffs’ expert Rothstein

selected that lot as a conservative example of an Oahu

residential homestead for purposes of calculating Oahu

residential homestead applicant damages using the methods

proposed by the Plaintiffs in their first and second proposed

damages models.    Rothstein referenced the 5,000-square-foot

Maili lot in his Declaration attached to Plaintiffs’ first
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motion proposing a damages model.          Rothstein again referenced

the Maili lot in his Declaration attached to Plaintiffs’ second

motion proposing a damages model, stating,

             [f]or the purpose of this valuation, I have assumed a 5,000
             square foot lot in Maili. I have used this assumption based
             upon the most conservative estimates, i.e., the smallest lot
             size noted by Judge Hifo in her opinion and in the area where
             the market values are lowest. These data are additionally
             conservative, as Maili lots were less expensive than lots in
             urban Honolulu.

             In his Declaration, Rothstein referred to Judge Hifo’s

2009 Liability Order, which stated, citing DHHL witness Darrell

Yagodich’s testimony, “[t]he residential homesteads likewise

have been trimmed from 7,500 square feet on Oahu in 1983 to a

smaller 5,000 square feet[.]”

             The circuit court’s overall damages model uses FMRV as

the basis for calculating each residential claimant’s overall

damages.12    The circuit court did not err in using the FMRV of

the Maili lot as the basis for calculating the entire subclass’s



     12   In the October 7, 2014 Trial Order, the circuit court ordered,

             IT IS HEREBY ORDERED, ADJUDGED AND DECREED that for purposes
             of calculating damages for claimants who applied for Oahu
             residential leases under the February 14, 2013, Order, the
             “Best Fit” model as set forth in Exhibit D-40 shall be used
             to determine the fee simple values to calculate annual fair
             market rental values. This model comprises (i) annual rental
             values based on four percent (4%) of the fee simple value of
             the land area of a 5,000 square foot lot in Maili for any
             given year; (ii) rents adjusted annually; and (iii) a “best
             fit” model derived from actual fee simple Maili valuations
             from 1959 through July 8, 2013 (as shown on Exhibit D-2);
             (iv) with no increases for the consumer price index (“CPI”)
             or present value adjustments.

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 damages.    The circuit court chose a representative lot on which

 to base damages to satisfy the HRCP Rule 23(b) requirement that

 class action damages be capable of being measured class-wide.

 Nothing in the record indicates that a 5,000-square-foot lot in

 Maili is inappropriate for purposes of calculating class-wide

 damages.    The State presented no evidence that compares land

 values in Maili to land values in other homestead locations on

 Oahu or the neighbor islands.13

             Based on the record before this court, we hold that

 the circuit court did not err in selecting the Maili lot as the

 sample residential lot on which class-wide damages will be

 based.

       3.   All waitlisted beneficiaries are entitled to damages
            pursuant to the FMRV Model, subject to the State’s
            rebuttal.

             The HHCA envisioned the creation of a public land

 trust that would return Native Hawaiians to the land and prevent

 further displacement of the Hawaiian people.           Hawaiian Homes

 Commission Act, ch. 42, sec. 101, 42 Stat. 108, 8-9 (1920).

 However, the federal government, and later the state government,

 which took over the role of trustee in 1959, mismanaged the




       13   In addition, the State has not appealed the circuit court’s rulings
that applied a statewide measure of agricultural and pastoral damages based on
lots on the islands of Maui and Hawaii, respectively.
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Trust by misappropriating home lands for non-beneficiary use,

failing to restore the lands or compensate the trust, and

failing to keep adequate records.        Rather than placing

beneficiaries on homestead lots, the State placed beneficiaries

on a long waitlist.     The waitlist for leasing home lands grew

and continued to grow.

           In 2009, the circuit court found that the State

breached its trust duties to keep and render accounts, exercise

reasonable care and skill, administer the trust, and make the

trust property productive.      The circuit court also found that

these breaches caused eligible Native Hawaiians to remain on the

waitlist and suffer damages as a result.         The circuit court

specifically identified the need for further proceedings to

determine the amount of damages, however, and the State now

contests the method for determining damages that the circuit

court established.

           It is clear to us that the State, by mismanaging the

Trust, failing to keep adequate records, and continuing to

litigate this case for decades, is responsible for creating a

situation in which it will be difficult to accurately assess

damages.

           Classic principles of trust law shift the burden to

the trustee, once a beneficiary has proven that breach of trust


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duties occurred and that loss resulted, to prove that the amount

of damages should be limited as a result of the beneficiary’s

action or circumstance.     See George Gleason Bogert et al.,

Bogert’s The Law of Trusts and Trustees § 871 (2020) (“If the

beneficiary makes a prima facie case, the burden of

contradicting it or showing a defense will shift to the

trustee.”); see also Restatement (Second) of Trusts § 172 cmt. b

(Am. Law Inst. 1959) (“The burden of proof is upon the trustee

to show that he is entitled to the credits he claims, and his

failure to keep proper accounts and vouchers may result in his

failure to establish the credit he claims.”).          Indeed, Hawaii

has recognized that the nature of the case may warrant a lesser

degree of certainty with respect to the amount of damages and

that, if the fact of damages is established, “a more liberal

rule is allowed in determining the amount.”          Coney, 39 Haw. at

139.

          In addition to the traditional principles of burden-

shifting in the context of damages on which we base our holding,

we are mindful of our previous holding in Kalima I that Chapter

674 should be “liberally construed to suppress the perceived

evil and advance the enacted remedy” and should not be narrowly

interpreted to “impede rather than advance the remedies”

provided by the statute.      111 Hawaiʿi at 100, 137 P.3d at 1006

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 (quoting Flores, 70 Haw. at 12, 757 P.2d at 647).

             We adopt the FMRV Model and hold that every trust

 beneficiary is entitled to damages, pursuant to that model, for

 the years during which the beneficiary was on the waitlist.              We

 hold that the State bears the burden of proving that individual

 beneficiaries are entitled to reduced damages for any reason.

             The State has argued that individual beneficiaries

 must show, for example, that the beneficiary spent money out of

 pocket renting alternative land, that the beneficiary did not

 refuse a homestead offer, that the beneficiary mitigated their

 damages, and that the beneficiary is part of the defined

 subclass.

             Establishing this proof will be prohibitively

 difficult for beneficiaries, who are not at fault for the time

 that has passed or the State’s failure to administer the Trust.

 Instead, the State must shoulder this burden by proving to the

 Special Master that individual beneficiaries’ damage awards

 should be reduced after damages are calculated by the FMRV

 damages model.14



      14    The parties raise numerous issues surrounding mitigation, including
what it means for a beneficiary to have deferred from participation in a
homestead offering and to what extent beneficiaries mitigated their damages.
Each beneficiary’s factual scenario surrounding these issues will be different
based on the beneficiary’s individual experience attempting to secure a
homestead from the State. “In contract or in tort, the plaintiff has a duty to
make every reasonable effort to mitigate his damages. The burden, however, is
                                                                 (continued. . .)
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 B.   The circuit court correctly ruled that adjusting damages to
      present value constitutes an award of prejudgment interest in
      violation of HRS § 661-8.

             The circuit court adhered to the HRS Chapter 674

 actual damages requirement by ruling that damages will not be

 adjusted to present value.        The circuit court correctly ruled

 that the damages model does not provide for “increases for the

 consumer price index (‘CPI’) or present value adjustments.”

             The adjustment of damages to present value to account

 for inflation would impermissibly award Plaintiffs prejudgment

 interests in violation of HRS § 661-8 (2016).            HRS § 661-8,

 which precludes prejudgment interest against the State,

 provides, “[n]o interest shall be allowed on any claim up to the

 time of the rendition of judgment thereon by the court, unless

 upon a contract expressly stipulating for the payment of

 interest, or upon a refund of a payment into the ‘litigated

 claims fund’ as provided by law.”




upon the defendant to prove that mitigation is possible, and that the injured
party has failed to take reasonable steps to mitigate his damages.” Malani v.
Clapp, 56 Haw. 507, 517, 542 P.2d 1265, 1271 (1975) (internal citations
omitted). As such, the State bears the burden of proving a that a beneficiary
failed to mitigate damages and that the beneficiary’s damages should therefore
be reduced. The Special Master shall make the final damages calculation.
Plaintiffs concede that “[t]he only event that would legally limit a class
member’s claim to damages for ‘failure to mitigate’ consistent with the rules
would be the Beneficiary’s refusal to select a lot after being offered an award
and a lease.” Accordingly, we hold that, in order to carry its burden of
proving that a beneficiary failed to mitigate damages, the State must prove that
it specifically offered a homestead award and lease to that beneficiary and that
the beneficiary thereafter refused to select a lot.

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            This court has defined prejudgment interest as

“compensation for the delay in payment of money damages which is

measured from accrual of the claim for relief until final

judgment[.]”   Rodrigues v. State, 52 Haw. 156, 169, 472 P.2d

509, 518 (1970).    Adjusting for inflation, or bringing damages

up to present value, would compensate Plaintiffs for the passage

of time between the moment they suffered loss to the time of

final judgment.    As such, adjusting for inflation constitutes

prejudgment interest.

            In Library of Congress v. Shaw, 478 U.S. 310 (1986)

(superseded by statute), the United States Supreme Court

confirmed that inflation adjustment is not a separate damages

principle, but is part of calculating prejudgment interest.

There, evaluating damages against the government where a pre-

judgment interest prohibition similar to HRS § 661-8 existed,

the Court held that “whether the loss to be compensated . . .

stems from an opportunity cost or from the effects of inflation,

the increase is prohibited by the no-interest rule.           In essence,

the inflation factor adjustment is a disguised interest award.”

Id. at 322 (emphasis added) (internal quotations and citations

omitted).

            This court’s definition of prejudgment interest,

viewed together with the United States Supreme Court’s


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observation about the relatedness of inflation and prejudgment

interests, indicate that the adjustment of Plaintiffs’ damages

to account for inflation in this case would impermissibly

constitute prejudgment interest.           See Rodrigues, 52 Haw. at 169,

472 P.2d at 518 and Library of Congress, 478 U.S. at 322.

            Moreover, prejudgment interest does not constitute

actual damages and is therefore precluded by HRS Chapter 674.

Actual damages do not include the amount that a beneficiary

would have paid toward renting alternative land had they rented

that land now.      Plainly, awarding beneficiaries more than what

they actually paid toward alternative lands would result in

awards that exceed beneficiaries’ actual damages.             Therefore,

adjusting beneficiaries’ damages for inflation would also run

afoul of HRS Chapter 674.

            The circuit court correctly ruled that damages may not

be adjusted to present value, as doing so would constitute the

award of prejudgment interest in violation of HRS § 661-8 and

would contravene the express actual damages limitation of HRS

Chapter 674.

C.   The circuit court erred in ruling that damages will not begin
     to accrue until six years after DHHL received a beneficiary’s
     homestead application.

            Both parties argue that the circuit court incorrectly

ruled that a beneficiary’s damages did not begin to accrue until

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six years after DHHL received that beneficiary’s homestead

application.

          On January 24, 2012, the circuit court entered an

Order Re Parties’ Damages Model.         In the Order, the circuit

court found, inter alia, “for purposes of the computation of

damages[,] the time to run would start at the earliest six years

from the date a beneficiary’s application is accepted for

placement on the list to receive homesteads.”          The circuit court

based its ruling on the following testimony of Henderson,

“assuming [they] had the resources available to them, the normal

development process [] probably [takes] five to six years.”

Henderson also testified:

          DHHL’s position [on what constitutes placement on the land in
          a prompt and efficient manner, specifically, the number of
          years between an application and an award] is that certainly,
          again, assuming you had the resources available to them, the
          normal development process is probably five to six years. I
          mean, that’s not, you know – I mean, yeah, you talk to any
          developer in the private market, in the private sector, they
          probably would tell you the same thing.
                I mean, planning, permitting, engineering plans,
          offsite, onsite construction, et cetera, home reconstruction,
          we are looking at a period of five to six years.”

          While the court may be liberal in its determination of

the amount of damages after liability is established, especially

where the uncertainty was caused by defendant’s wrongdoing, see

Exotics Hawaii-Kona, 116 Hawaii at 292, 172 P.3d at 1036, “[t]he

extent of plaintiff’s loss must be shown with reasonable

certainty and that excludes any showing or conclusion founded

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upon mere speculation or guess.”         Ferreira v. Honolulu Star-

Bulletin, Ltd., 44 Haw. 567, 576, 356 P.2d 651, 656 (1960).

          Here, there is not a sufficient basis in the record to

support the circuit court’s ruling, as it appears that

Henderson’s testimony amounts to “mere speculation or guess.”

See id.   First, Henderson’s testimony assumes that DHHL had

access to all necessary resources.        In fact, the circuit court

specifically found that “the major drawback to awarding

homesteads was insufficient DHHL funds to complete site

development, compounded by the poor quality or relatively remote

locations of land thus requiring greater development expenses.”

(Emphasis added).    Henderson’s testimony does not, therefore,

reflect the conditions under which DHHL actually operated.

Second, while Henderson testified on behalf of DHHL at trial, he

is not an expert on land development and did not proffer

concrete reasons to support his estimate.         Henderson simply

asserted that a private market developer would agree with his

estimate and cited various factors that could delay the

development process.     Henderson’s assertions are based on

speculation and false assumption.

          In addition, nothing in the record indicates that the

development process timeline is in any way connected to the

timing of when an applicant was placed on the waitlist.            In


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other words, the State did not begin to develop a homestead plot

each time a new beneficiary applied for a homestead.             Even if

six years is an accurate development delay estimate, that delay

did not commence each time a claimant was placed on the

waitlist.     Therefore, there is no logical reason why the State

should be allotted a six-year grace period between when the

applicant was placed on the waitlist and when damages began to

accrue.

            The circuit court adopted the six-year rule based on

Henderson’s “mere speculation or guess.”           See Ferreira, 44 Haw.

at 576, 356 P.2d at 656.        In addition, the homestead development

process timeline appears to be unrelated to the timing of when

claimants filed their applications.          In light of the foregoing,

the circuit court erred in adopting the six-year rule.              We

vacate the Order Re FMRV Model to the extent that it adopted the

six-year rule.

D.   The circuit court did not err in finding that the State
     breached its trust duties by failing to recover lands that
     were withdrawn from the Trust before statehood.

            The circuit court correctly found that the State

breached its trust duties by failing to recover lands that were

withdrawn from the Trust prior to statehood.

            The State argues that the circuit court erred in

finding that the State breached its trust duties by not


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recovering lands that were withdrawn from the Trust by the

federal government prior to Statehood.         The State asserts that

it would have been “a legal impossibility for the State to

recover those lands from the federal government” because the

federal government did not waive its sovereign immunity against

suits to resolve title issues to land until the passage of the

Quiet Title Act (QTA) in 1972 and because “[p]ost-1972, claims

to recover the trust lands would have faced the QTA’s 12-year

statute of limitations.”      (citing 28 U.S.C. 2409a(i) (as amended

by Pub. L. 99-598, November 4, 1986)).         As such, the State

argues that it “had no duty to pursue a futile action against

the federal government.”

           Plaintiffs counter that the State “wrongfully assumes

that the only means of remedying its trust breaches was

litigation against the federal government.”          Plaintiffs further

contend that, in light of undisputed facts in the record, the

circuit court correctly found that the State “breached its

duties to compensate the trust for wrongfully taken lands or

return the lands to the trust at the assumption of its trust

duties.”

           Between 1922 and 1969, the federal government and

later the State alienated or “set aside” trust lands – that is,

the State used Hawaiian home lands for purposes not permitted by


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the Trust.   When the Territory of Hawaii became a state in 1959,

the State of Hawaii took over the management and disposition of

the Hawaiian home lands, including those that had been set aside

by the federal government.      Kalima I at 87, 137 P.3d at 993.

The State thereafter breached its trust duty either to restore

those lands to the Trust or compensate the Trust.

          The circuit court found that the State breached the

Trust as follows:

          Defendant State’s failure for 25 years (1959-1984) to correct
          its own and the predecessor trustees’ illegal “set asides” by
          cancellation or withdrawal of those executive orders or
          proclamations together with Defendant State’s failure
          throughout the claims period to restore lands to the trust
          and to compensate the trust for fair rent during the period
          of non-beneficiary State use of trust lands were breaches of
          trust and trust duties set forth in Sections 170, 174, 175,
          176, 177, 179, 181, 223 [of the Restatement [Second] of
          Trusts].

In other words, the State breached the Trust by failing to

correct the ongoing dispossession of trust lands, which it could

have done by cancelling and withdrawing executive orders.

Accord Ching v. Case, 145 Hawaii 148, 170, 449 P.3d 1146, 1168

(2019) (“The most basic aspect of the State’s trust duties is

the obligation ‘to protect and maintain the trust property and

regulate its use.’”) (quoting State ex rel. Kobayashi v.

Zimring, 58 Haw. 106, 121, 566 P.2d 725, 735 (1977)).            The State

also breached its trust duties by failing to restore those lands

to the Trust and by failing to compensate the Trust for the

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lands’ rental value while in use by non-beneficiaries.

          Contrary to the implication of the State’s position,

the circuit court did not rule that the State was required to

sue the federal government to recover those trust lands in order

to avoid breaching the Trust.       Accord Ching, 145 Hawaii at 171,

449 P.3d at 1169 (holding that the State had a trust duty to

monitor the federal government’s noncompliance with its lease of

public lands but did not have a trust duty to initiate an

enforcement action).     In fact, the State has previously restored

alienated trust lands and compensated the Trust for non-

beneficiary use without suing the federal government.            In 1994,

with the passage of Act 352, the State transferred 16,518 acres

of trust lands from DLNR to DHHL and paid DHHL $12 million for

uncompensated use of those lands.        Essentially, the circuit

court found that the State breached its trust obligation by

failing to restore lands or compensate the Trust sooner.

          Under the basic principles of trust law, a successor

trustee is liable to a beneficiary for breach of trust if the

trustee (a) knows or should know of a situation constituting a

breach of trust committed by the trustee’s predecessor and

improperly permits it to continue; (b) neglects to take proper

steps to compel the predecessor to deliver the trust property to

the trustee; or (c) neglects to take proper steps to redress a

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breach of trust committed by the predecessor.            Restatement

(Second) of Trusts § 223 (Am. Law Inst. 1959).            The State knew

of the federal government’s misuse of trust lands and improperly

permitted it to continue.        In addition, the State neglected to

take proper steps to redress the breach committed by the federal

government as original trustee.         The State is clearly, then,

liable to the beneficiaries for breach of trust.             See Rest. of

Trusts § 223.

            As a result, the circuit court correctly found that

the State breached its trust duties by failing to take action to

restore recovered land to the Trust upon Statehood in 1959.

E.   The circuit court did not err in establishing the subclass
     list.

            The State argues that the circuit court erred in

establishing an overbroad subclass list.           The State alleges that

the circuit court found it liable to “numerous individuals who

never had a viable claim against the State” because the circuit

court “adopted Plaintiffs’ list of subclass members in its

entirety, despite the fact that it contains a large number of

people who are categorically not entitled to relief, and despite

the fact that it conflicts with the court’s own class and

subclass definitions.”       These individuals include claimants who

settled with the Panel, claimants who failed to submit written

notice of intent to sue by October 1, 1999, claimants who were
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not on the homestead waitlist or who did not submit a waitlist

claim, and claimants who do not satisfy the Native Hawaiian

blood quantum requirement.

          Plaintiffs argue that including these individuals was

proper because “[e]xclusion of these individuals from the class

adjudication process means that they would be free to pursue

their own claims against [the State] and that there would be no

res judicata effect on these claims[.]”         In addition, Plaintiffs

note that until each claimant presents the claimant’s evidence

to the Special Master, there is no way for the circuit court to

make factual determinations as to which claimants lack viable

claims.

          The June 6, 2007 subclass certification for purposes

of liability defined the waitlist subclass as “[a]ll Chapter 674

plaintiffs who were on the [DHHL] waiting list for a homestead

and who submitted a claim to [the Panel] because they were not

awarded a homestead in a prompt and efficient manner.”

          On July 26, 2017, the circuit court granted

Plaintiffs’ Motion to Establish Claims Administration Process

and appointed a Special Master to perform the ministerial work

of processing all subclass members’ damages claims.           The order

also stated, “[a]n amended 54(b) judgment shall be entered on

each claim after the completion of the periods set by the Court


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for review of the returned claim by the Claims Administrator and

Special Master, if any.”

          The circuit court adopted Plaintiffs’ proposed

waitlist subclass list, which was compiled “from a print out of

an Excel spreadsheet prepared by the Hawaiian Claims Office

(HCO) listing every individual who filed a claim with the HCO

Panel.”

          The circuit court correctly adopted the list in order

to bind all persons who could pursue a claim as a waitlist

member to the judgment in this case.        Importantly, the class

list includes all persons who filed a claim with the Panel.             Now

that the class has been established, each person on the class

list will go through the claims administration process, where

the Special Master will determine whether that person does or

does not have a viable claim.       The claim of any persons who fail

to meet the subclass definition, for example, because they

already settled their claim, or are excluded by statute, for

example, because they do not meet the Native Hawaiian blood

quantum requirement, will be excluded.         At that time, individual

judgment will be entered against disqualified claimants and they

will be precluded from relitigating their non-viable claims.




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          HRCP Rule 23(c)(3) (2011)15 provides that a judgment

can only bind and preclude persons who are members of a class.

As Plaintiffs note, “exclusion of these individuals from the

class adjudication process means that they would be free to

pursue their own claims against Defendants and that there would

be no res judicata effect on these claims because they were not

litigated and reduced to judgment.”        Therefore, although some of

these class members may not have viable claims, it is

appropriate to include them in the class in order to preclude

them from attempting to relitigate their non-viable claims.

          Moreover, inclusion in the subclass list does not mean

that a claimant is entitled to damages.         Claimants bear the

burden of proving that they are qualified to receive damages.

The court appointed a Special Master to make factual

determinations, based on evidence, as to which claimants are


    15   HRCP Rule 23(c)(3) provides,

          (c) Determination by Order Whether Class Action to be
          Maintained; Notice; Judgment; Actions Conducted Partially as
          Class Actions.

          . . . .

                (3) The judgment in an action maintained as a class
                action under subdivision (b)(1) or (b)(2), whether or
                not favorable to the class, shall include and describe
                those whom the court finds to be members of the class.
                The judgment in an action maintained as a class action
                under subdivision (b)(3), whether or not favorable to
                the class, shall include and specify or describe those
                to whom the notice provided in subdivision (c)(2) was
                directed, and who have not requested exclusion, and
                whom the court finds to be members of the class.
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entitled to damages.     Any subclass member whose claim is

excluded because it is not viable will not be entitled to

damages.

           The circuit court did not err in establishing the

subclass list.    The class has been certified, and the class list

is established.    Each class member’s individual entitlement to

damages will be determined, and no subclass member who is

“categorically not entitled to relief” will obtain damages or a

favorable judgment.

                             IV. CONCLUSION

           We resolve the foregoing issues as follows.           We

(1) affirm the February 14, 2013 Order Re FMRV Damages Model in

accordance with the preceding analysis; (2) affirm the October

7, 2014 Trial Order adopting the best fit curve and denying

increases for CPI or present value adjustments; (3) affirm the

September 22, 2016 order selecting the Maili lot as the sample

residential lot to be used statewide; (4) vacate the January 24,

2012 order establishing the “six-year rule;” (5) affirm the

November 3, 2009 liability order finding that the State breached

its trust duties by failing to correct ongoing dispossession of

trust lands; and (6) affirm the June 6, 2007 order certifying




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the waitlist subclass.     We further hold that the State bears the

burden of proving that a beneficiary failed to mitigate damages.

Clyde J. Wadsworth,                      /s/ Mark E. Recktenwald
Kimberly T. Guidry,
Robert T. Nakatsuji, and                 /s/ Paula A. Nakayama
Kalikoonalani D. Fernandes
for Defendants-Appellants/               /s/ Richard W. Pollack
Cross-Appellees
                                         /s/ Michael D. Wilson
Carl M. Varady and
Thomas R. Grande for                     /s/ Matthew J. Viola
Plaintiffs-Appellees/
Cross-Appellants




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