LIHUE — A Fifth Circuit judge on Tuesday ruled that a lawsuit brought against the state Board of Land and Natural Resources by a Kauai concrete company over $1 million worth of sand can move forward.
O. Thronas, Inc., filed a lawsuit against the BLNR in February, after years of failed negotiations in a protracted contractual dispute that originated nearly a decade ago. In its civil suit against the state Department of Natural Resources’ governing board, O. Thronas claims it overpaid the BLNR by more than $1 million for the right to remove sand from state-owned land in Waimea.
The agreement was simple. The BLNR would get paid and have sand cleared from an area slated to be turned into a sanctuary for water birds, and O. Thronas would have access to dozens of tons of the raw material it uses to manufacture concrete.
Payments for the sand were to be made monthly based on the amount of sand extracted from the property, but after work began in February 2011, O. Thronas’ civil complaint says procedures “for the removal and payment of the sand were not strictly followed by the parties, and the BLNR generally did not monitor, inquire about, or require removal of” the minimum amounts of sand under the contract.
The lawsuit says that over the course of the next two years, O. Thronas paid the BLNR the full amount stipulated by the contract — about $1.5 million — but was actually only able to remove about a third of the total amount due to “a sudden and significant downturn in the construction industry on Kauai.”
Consequently, the majority of the “money and sand remain in the BLNR’s possession,” according to the complaint, which states that O. Thronas overpaid the BLNR by a little over $1 million for sand it has not been allowed to remove.
State Deputy Attorney General David Day represented the BLNR at the hearing, arguing first that the arrangement was not subject to legal standards that apply to normal contracts essentially because O. Thronas “paid for the privilege” of taking the sand from state-owned land.
Fifth Circuit Judge Kathleen Watanabe was not convinced.
“This was clearly a reciprocal arrangement,” she said, dismissing a prior state Supreme Court decision Day cited in support of his argument as irrelevant and “not on point at all.”
Watanabe went on for several minutes, tying Day up in his own legal shoestrings for arguing that the agreement was not contractual when a document drafted by the BLNR specifically mentioned a breach of contract.
“How do you reconcile that?” she asked Day, who was forced to admit that his own court filing contained what he called “a drafting error.”
Day also attempted to convince Watanabe that the case should be thrown out because O. Thronas had waited to long to file a claim, arguing that the clock should have started on a two-year statute of limitations back in March 2013, when settlement discussions between the BLNR and O. Thronas first began.
“They knew there was an issue,” he said. “They knew they weren’t getting their money back. They knew they weren’t getting the sand.”
O. Thronas’ lawyer, Jesse Schiel, argued that his client was treated unfairly and ultimately misled by BLNR officials.
“The question is, what happens if all the sand you’re required to remove doesn’t get removed?” he asked, pointing out that it was the BLNR’s responsibility to notify the contractor if work was not completed satisfactorily. “That was their right, and to this day they haven’t done that.”
Instead, Schiel said BLNR officials refused to state their intentions of keeping the excess money and the remaining sand by continuing to deny O. Thronas trucks access to the property.
“They told us as much without saying it directly,” Schiel said. “That’s when we decided to sue.”
Watanabe called the case “very problematic for BLNR,” and said an email sent to the company’s representatives from the state’s Attorney General’s office contained some “very substantive statements,” about the motives and behavior of DLNR officials.