OCTOBER 14, 2003, ARAKAKI#2, PLAINTIFFS' MOTION AND MEMO IN SUPPORT, TO VACATE RESTRICTIONS ON PLAINTIFFS' STANDING AS STATE TAXPAYERS OR, IN THE ALTERNATIVE, TO CERTIFY THE STANDING ORDER AS FINAL

Previously Judge Mollway had ruled that the Arakaki plaintiffs have standing only as taxpayers. The judge’s theory was that revenue from ceded lands is not tax money. Therefore the plaintiffs in their status as taxpayers cannot attack either the diversion of ceded land revenues to racially exclusionary purposes or the foregoing of ceded land revenue through the leasing of ceded lands to a preferred racial group at negligible lease rent. The order limiting the plaintiffs’ standing was part of the order dismissing the U.S. government as a defendant on the grounds that no federal laws were being challenged. Later, the 9th Circuit Court made a decision in two other cases (Barrett and Carroll) that upheld the District Court’s dismissal of those cases on the grounds that plaintiffs Barrett and Carroll lacked standing partly because they had failed to name the United States as a defendant. Within a few days of the 9th Circuit decision, Judge Mollway vacated her previous order to dismiss the U.S. in the Arakaki case, and ordered all parties to present arguments on whether the U.S. should be reinstated as a plaintiff. Since the order limiting plaintiffs’ standing to tax dollars was a part of the order dismissing the U.S., and since that entire order has now been vacated, plaintiffs argue in this motion that the limitation on their standing is no longer in effect. They further argue that the U.S. should be named as a defendant because portions of the Admissions Act of 1959 and the Hawaiian Homes Commission Act of 1921 should be nullified because they are unconstitutional violations of the 14th Amendment. Plaintiffs further argue that the tens of millions of dollars in ceded land revenues annually diverted to racially exclusionary OHA and DHHL force state taxpayers to make up for the lost revenue by raising taxes. Plaintiffs argue that if Judge Mollway nevertheless decides to maintain the limitation on plaintiffs’ standing, then that ruling should be issued as a final order and not remain open for reassessment until the case-in-chief is decided. Only by having a final order regarding limitation on standing can that issue be appealed while other aspects of the case can move forward. Otherwise, a later ruling on appeal of the standing limitation, even if favorable to plaintiffs, would then necessitate starting the entire process over again and no forward progress would have been made despite several years of delays and obfuscation, during which time huge amounts of both tax dollars and ceded land revenues would have been lost to unconstitutional programs.

Following are four items: (1) a short table of contents so readers can see the topics of discussion (even though the page numbers are not useful); (2) a short table of authorities so readers can see the legal precedents being cited; (3) excerpts from the motion to either vacate limitations on standing or else make the order final; and (4) excerpts from the memorandum in support of the motion. Exerpts are being provided partly because of difficulties in getting a well-formatted version that would include legal captions. The text provided on this webpage is the complete text of each item, except for captions and formatting in items 3 and 4.

Asarco v. Kadish, 490 U.S. 605 (1989) 14, 21

Broad v. Sealaska, 85 F.3d 422 (9^th Cir. 1996) 23

Cammack v. Waihee, 932 F.2d 765 (9^th Cir. 1991) 9, 10, 19

Doe v. Madison School District, 177 F.3d 789 (9^th Cir. 1999) 18, 19, 21

Doremus v. Bd. of Education of the Borough of Hawthorne,

342 U.S. 429 (1952), 72 S.Ct. 394, 96 L.Ed. 475 (1952) 9, 11, 17, 19, 21

Frothingham v. Mellon, 262 U.S. 447, 486, 43 S.Ct. 597 (1923) 17, 21, 22

Fuller v. Volk, 351 F.2d 323 (3d Cir.1965) 18

Hawley v. Cleveland, 773 F.2d 736 (6^th Cir. 1985) cert denied, 475 U.S. 1047,

106 S.Ct. 1266, 89 L.Ed.2d 575 (1986) 10, 20

Hoohuli v. Ariyoshi, 631 F.Supp. 1153, 1157, 1159 (D. Haw. 1986) 12, 13

Hoohuli v. Ariyoshi, 741 F.2d 1169, 1178, 1180-81 (9^th Cir. 1984) 11, 12, 19

Hunt v. McNair, 413 U.S. 734, 93 S.Ct. 2868, 37 L.Ed.2d 923 (1973) 16, 21

Johnson v. Economic Development, 241 F.3d 501 (6^th Cir. 2001) 16, 20, 22

Kadish v. Asarco, 155 Ariz. 484, 486 747 P.2d 1183 (1987) 14

Mueller v. Allen, 463 U.S. 388, 103 S.Ct. 3062, 77 L.Ed.2d 721 (1983) 16, 21

Plans, Inc. v. Sacramento City Unified School District, 319 F. 3d 504 (9^th Cir. 2003) 7

Schneider v. Colegio de Abogados de Puerto Rico, 917 F.2d 620 (1st Cir.1990) 19, 21

State v. Zimring, 58 Haw. 106 (1977) 3

Walz v. Tax Comm'n, 397 U.S. 664, 90 S.Ct. 1409, 25 L.Ed.2d 697 (1970) 16, 21

(3) PLAINTIFFS' MOTION TO VACATE RESTRICTIONS ON PLAINTIFFS' STANDING AS STATE TAXPAYERS OR, IN THE ALTERNATIVE, TO CERTIFY THE "STANDING ORDER" AS FINAL PURSUANT TO F.R.C.P. RULE 54(b)

The only impact of the Carroll decision on this case is that it caused the Court to wisely vacate its September 3, 2002 Order Granting Defendant United States of America's Motion to Dismiss ("Order Dismissing U.S."). That, by necessity, vacated the portions of that order which limited the scope of Plaintiffs' taxpayer standing even more severely than the earlier Standing Order. For example the now vacated Order Dismissing U.S. said at page 3, "Contrary to Plaintiffs' argument, this court did not find that Plaintiffs may seek invalidation of the Hawaiian Homes and OHA laws in toto." and on page 4, fn 1, "Plaintiffs therefore [based on Hoohuli] now contend that they should be allowed to challenge the constitutionality of the HHC, DHHL, and OHA. This court disagrees." On page 4, the Order Dismissing U.S. also said "For example, to the extent OHA receives rents from the ceded lands and uses that money to fund programs for the benefit of Hawaiians and native Hawaiians, Plaintiffs do not have taxpayer standing to challenge the programs because they cannot assert the requisite threatened or sustained direct pocketbook injury based on the expenditure of tax money." Those portions of the Order Dismissing U.S. should have been vacated because they meant that, even if Plaintiffs proved all the hundreds of millions paid to the challenged programs were financed by the General fund, which consists almost entirely of tax dollars and their earnings, and even if all the allegations of the Complaint are true (as the court must assume in ruling on subject matter jurisdiction), Plaintiffs could not challenge the programs in their entirety. Now that that language is gone, the question that must be answered is whether it will come back or do these Plaintiffs really have taxpayer standing? Plaintiffs move the Court to vacate the restrictions and accord Plaintiffs the full scope of standing generally accorded state taxpayers: The right to challenge any measurable sum of public funds to further a challenged program or activity and any loss of revenue attributable to the challenged program or activity.

In the alternative, Plaintiffs move the Court to certify the Order Granting in Part and Denying in Part Motions to Dismiss on Standing Grounds; Order Denying Motion to Dismiss (or Reconsider Prior Order Finding Taxpayer Standing) on Political Question Grounds filed May 8, 2002 (the "Standing Order"), in its entirety, both as to Plaintiffs' standing as public land trust beneficiaries and as state taxpayers, as well as any amendments to the Standing Order, as final pursuant to F.R.C.P. Rule 54(b) by including an additional paragraph, "This Court determines that there is no just reason for delay and directs the Clerk to enter judgment based on this order." The purpose of this alternative motion, as more fully explained in the memorandum filed herewith, is to allow an appeal from the Standing Order while the determination of other issues continue in this case. This motion is based the Court's minute order of September 8, 2003, F.R.C.P. Rules 54(b), the attached memorandum and the pleadings and papers on file in this action.

(4) MEMORANDUM IN SUPPORT OF PLAINTIFFS' MOTION TO VACATE RESTRICTIONS ON PLAINTIFFS' STANDING AS STATE TAXPAYERS OR, IN THE ALTERNATIVE, TO CERTIFY THE "STANDING ORDER" AS FINAL PURSUANT TO F.R.C.P. RULE 54(b)

This memorandum will show that the Carroll decision and this Court's appropriate action in response (vacating its previous order dismissing the U.S. and thereby also vacating the severe limitations that order had imposed on Plaintiffs' standing as taxpayers) now require that the Court decide whether it will re-impose those restrictions and retain others or whether it will accord to Plaintiffs the same scope accorded to state taxpayers generally: The right to challenge any measurable sum of public funds to further a challenged activity and any loss of revenue attributable to the challenged activity. This memorandum also shows why, if the Court declines, it should certify the Standing Order as final so that an appeal may be taken and this threshold issue decided promptly while determination of other issues continue in this Court.

2. BACKGROUND: ROLE OF UNITED STATES. The United States created and became the initial trustee of Hawaii's public land trust in 1898 when it accepted Hawaii's public lands, ceded by the Republic of Hawaii, and agreed to hold the revenues and proceeds from them, with certain exceptions, "solely for the benefit of the inhabitants of the Hawaiian Islands for educational and other public purposes." Annexation Act (Newlands Resolution), 30 Stat. 750 (1898); 22 Op. Atty. Gen (1899). In 1921, the United States adopted the HHCA and set aside about 200,000 acres of the ceded lands exclusively for the benefit of "native Hawaiians" (defined explicitly by race, "descendants of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778"). In 1959, by the Admission Act, the United States transferred title to most of the ceded lands back to Hawaii and required the new State of Hawaii to hold the lands, and their proceeds and income, in a public trust. This was a continuation of the trust first established in 1898. Opp. HI A.G. 7/7/95; State v. Zimring, 58 Haw. 106, 124, 125 (1977). The Admission Act also required the new State of Hawaii to adopt the HHCA as a condition of statehood. The compact in ง4 of the Admission Act prohibits the State from changing the HHCA without U.S. consent and requires the State to use the "available lands" (the approximately 200,000 acres of the ceded lands set aside for the HHCA) only in carrying out the HHCA. The Admission Act ง5(f) reserves to the United States the right to bring suit for any breach by the State of the public land trust. Plaintiffs claim that, by adopting the HHCA in 1921 and thereafter implementing it and, in 1959, by requiring the State of Hawaii to adopt it as a condition of statehood, the United States violated the Equal Protection clause implicit in the Fifth Amendment and its fiduciary duty under the public land trust. By still prohibiting the State of Hawaii from changing the HHCA without U.S. consent and reserving the right to enforce any breach of trust by the State, the Admission Act required, and still requires, the State to continue to violate the Fourteenth Amendment (as well as its duty as successor trustee under the public land trust). As a result of this federal mandate, the State has spent and continues to spend tens of millions of State taxpayer dollars for discriminatory purposes each year and this causes harm to the pocketbooks of Plaintiffs and all State taxpayers similarly situated.

On May 8, 2002, the Honorable Susan Oki Mollway in her Order Granting in Part and Denying in Part Motions To Dismiss On Standing Grounds; Order Denying Motion To Dismiss (Or Reconsider Prior Order Finding Taxpayer Standing) On Political Question Grounds (the "Standing Order"), held that "Plaintiffs have taxpayer standing to assert their Equal Protection claims." She added, however, that "Plaintiffs only have taxpayer standing to challenge direct expenditures of tax money by the legislature." (Standing Order at 17); not the use of revenues from ceded lands (17 & 18); not the "settlement" of $30 million per year to Hawaiian Home Lands Trust; (18); and not the general obligation bonds issued for HHC, DHHL or OHA (19). In the same order, she dismissed for lack of standing Plaintiffs' claims as beneficiaries of the public land trust but did not determine that order was final or direct entry of judgment. Under F.R.Civ. P. 54(b), "in the absence of such determination and direction" the order "does not terminate the action as to any" of those claims and the order "is subject to revision at any time before the entry of [final] judgment." Thus, this action has not been terminated as to Plaintiffs' taxpayer or public land trust claims and is still subject to revision.

On September 3, 2003, this Court, sua sponte, entered its order regarding supplemental briefing noting that the Ninth Circuit's recent decision in Carroll v. Nakatani and Barrett v. Hawaii ("Carroll") may affect both issues that are to be decided and issues already decided in this case. "The court is also concerned that Carroll may affect various standing issues in the present case." In the supplemental briefings, all Defendants argued that Carroll required the Court to reconsider Plaintiffs' standing. OHA said, Carroll "leads to the inevitable conclusion that the present Plaintiffs, whose only interest is as state taxpayers, do not have standing to bring their generalized political grievance to this Honorable Court for adjudication." Hui Kako'o joined in OHA's brief. "The State also believes that the Carroll decision requires that this Court revisit its earlier standing ruling, and dismiss most of the claims in this case for plaintiffs' lack of standing ." SCHHA likewise said, Carroll "raises significant questions concerning Plaintiffs' ability to establish standing in this case."

On September 5, 2003, the Honorable Susan Oki Mollway vacated the September 3, 2002 Order Granting Defendant United States of America's Motion to Dismiss ("Order Dismissing U.S."). That, by necessity, vacated the portions of that order which limited the scope of Plaintiffs' taxpayer standing even more severely than the earlier Standing Order. For example the now vacated Order Dismissing U.S. said at page 3, "Contrary to Plaintiffs' argument, this court did not find that Plaintiffs may seek invalidation of the Hawaiian Homes and OHA laws in toto." and on page 4, fn 1, "Plaintiffs therefore [based on Hoohuli] now contend that they should be allowed to challenge the constitutionality of the HHC, DHHL, and OHA. This court disagrees." On page 4, the Order Dismissing U.S. also said "For example, to the extent OHA receives rents from the ceded lands and uses that money to fund programs for the benefit of Hawaiians and native Hawaiians, Plaintiffs do not have taxpayer standing to challenge the programs because they cannot assert the requisite threatened or sustained direct pocketbook injury based on the expenditure of tax money." Those portions of the Order Dismissing U.S. should have been vacated because they meant that, even if Plaintiffs proved all the hundreds of millions paid to the challenged programs were financed by the General fund, which consists almost entirely of tax dollars and their earnings, and even if all the allegations of the Complaint are true (as the court must assume in ruling on subject matter jurisdiction), Plaintiffs could not challenge the programs in their entirety. Now that that language is gone, the question that must be answered is whether it will come back or do these Plaintiffs really have taxpayer standing?

6. THE PLANS, INC. CASE: TAXPAYERS ARE ENTITLED TO CHALLENGE ANY MEASURABLE SUM OF PUBLIC FUNDS TO FURTHER A CHALLENGED PROGRAM IN ITS ENTIRETY.

Plans, Inc. v. Sacramento City Unified School District, 319 F. 3d 504 (9th Cir. 2003), decided February 10, 2003, is the Ninth Circuit's most recent decision on the issue of taxpayer standing in the context of a "good-faith pocketbook" challenge. In Plans, an organization made up of taxpayers challenged expenditures by two school districts that were used to fund public schools that incorporated quasi-religious beliefs in their teacher training and curriculum. Id., at 505-506. After demanding that the plaintiff organization make an offer of proof that taxpayer funds were actually being used to fund the challenged programs and finding said offer to be insufficient, the District Court granted judgment in favor of the defendants based on lack of standing. Id. On appeal, the Ninth Circuit reversed the District Court. In so doing, it distinguished an assertion of taxpayer standing against specific programs and activities (which had been the standard applied by the District Court in that case and by this Court in the Standing Order) from an attack upon an unconstitutional policy that permeates an entire state agency(ies) and cannot be separated from specific activities of the state agency that may be permissible. Id., at 508. Where the thrust of a plaintiff's challenge takes the latter form (as does the Plaintiffs' in this case), the Ninth Circuit held all that need be shown to maintain taxpayer standing is (i) that the plaintiff(s) pay taxes, (ii) that a measurable amount of public funds are being used to support the state agency and (iii) the existence of an allegedly unconstitutional act. "Because PLANS challenges the Waldorf school curriculum as a whole, and because it has shown that a measurable amount of public funds support the Waldorf schools, PLANS has taxpayer standing to pursue this suit." Id., at 508.

Although some of the cases relied on by the Court specifically found that plaintiffs lacked standing because they failed to allege a direct injury caused by the expenditure of tax dollars, none of those cases address the precise issue before the court in this case --- whether a loss of revenue or other injury to the State fisc (resulting, for example, from the below-market Homestead leases, diversions of public lands or revenues from public lands to DHHL and OHA, and loss of interest and investment income on public moneys paid to and held by DHHL and OHA) is sufficient to establish a financial interest under Doremus v. Bd. of Education of the Borough of Hawthorne, 342 U.S. 429 (1952) to allow Plaintiffs, as taxpayers, to challenge those programs. This section will show the answer to that question is Yes, Plaintiffs do have such a financial interest and are entitled to challenge such programs. Cammack. As authority for the proposition that "To the extent the HHC, DHHL and OHA programs rely on funds other than tax money, Plaintiffs do not have taxpayer standing to challenge those programs.", the Order Dismissing U.S. at page 4 cites Cammack v. Waihee, 932 F.2d 765 (9th Cir. 1991). Cammack, at 932 F.2d 771, held that plaintiffs had standing as both state and municipal taxpayers to challenge the expenditure of tax revenues on paid leave days for the Good Friday holiday. (The challenged statute did not appropriate any funds. "Hawaii's section 8-1 appropriates no funds to carry out its purposes. By providing for state holidays, however, the statute has at least the fiscal impact that many state and local government offices are closed and many state and local government employees need not report to work." Emphasis added. Id. at 767.) The Cammack court said at 932 F.2d 770 that municipal taxpayer standing requires no more injury than an allegedly improper municipal expenditure. "Thus, we conclude that municipal taxpayer standing simply requires the "injury" of an allegedly improper expenditure of municipal funds, and in this way mirrors our threshold for state taxpayer standing." On the same page, the court cites Hawley v. City of Cleveland, 773 F.2d 736, 741- 42 (6th Cir.1985) , cert. denied, 475 U.S. 1047, 106 S.Ct. 1266, 89 L.Ed.2d 575 (1986) (municipal taxpayers may challenge city lease of airport terminal space to church where the lease agreement could have a detrimental impact on the public fisc). (Emphasis added.) Also on page 770, "Legislative enactments are not the only government activity which the taxpayer may have standing to challenge. (contrasting state taxpayer's ability to challenge executive conduct with federal taxpayer's.)" (Internal citations omitted.) Nowhere in its decision in Cammack does the Ninth Circuit Court say that plaintiffs "only have taxpayer standing to challenge direct expenditures of tax money by the legislature" nor does it anywhere say, "To the extent the HHC, DHHL and OHA programs rely on funds other than tax money, plaintiffs do not have taxpayer standing to challenge those programs." Instead the Cammack decision says municipal taxpayer standing simply requires the "injury" of an allegedly improper expenditure of municipal funds "and in this way mirrors our threshold for state taxpayer standing." and that state taxpayers, like municipal taxpayers, may challenge legislative enactments, executive conduct and leases of public property "which could have a detrimental effect on the public fisc". Hoohuli. In Hoohuli v. Ariyoshi, 741 F.2d 1169 (9th Cir. 1984) the plaintiffs brought a taxpayers' action challenging the appropriation of state funds to the Office of Hawaiian Affairs, and the use of these funds by the Office, for the benefit of "Hawaiians." Plaintiffs asserted that the legislature's definition of "Hawaiian" is unconstitutional because there is no reference to blood quantum, and that the appropriation of taxpayer monies to be expended for the benefit of "Hawaiians" deprives them of equal protection, as guaranteed by the Fourteenth Amendment and by title 42, section 1983 of the United States Code." This court, Samuel P. King, then Chief Judge, dismissed the complaint for lack of jurisdiction, and plaintiffs appealed. The Court of Appeals for the Ninth Circuit affirmed in part, reversed in part, and remanded. In Hoohuli the court said, at 1180, 1181, "The pleadings set forth with specificity amounts of money appropriated and spent for allegedly unlawful purposes. This case fits the description of a "good-faith pocketbook action" set forth in Doremus 342 U.S. at 434, 72 S.Ct. at 397. We therefore hold that at least some of the individual plaintiffs have standing as taxpayers." "The individual plaintiffs who are not descendents of the original island inhabitants have standing as taxpayers to bring this action." The court also noted at 741 F.2d 1181 that ". the programs established under chapter 10 of the Hawaii Revised Statutes are supported in part by funds from a trust which are required to be spent exclusively for "native Hawaiians". Nevertheless the court did not say or even suggest that plaintiffs could not seek invalidation of the OHA laws benefiting Hawaiians in toto; nor did it say or even suggest that "to the extent that OHA receives rents from the ceded lands and uses that money as matching funds for the benefit of Hawaiians. Plaintiffs do not have taxpayer standing to challenge" such use. (The OHA laws require "that section 5(f) funds be used to match certain legislative appropriations for the administration of OHA. These matching funds may be used to administer programs for "Hawaiians." See Hoohuli v. Ariyoshi, 631 F.Supp. 1153, 1157 (D. Haw. 1986)). The court, at 741 F.2d 1178, quoted the Supreme Court's language in Doremus suggesting that a taxpayer's grievance may be supported by an allegation that the challenged activity "is supported by any separate tax or paid for from any particular appropriation or that it adds any sum whatever to the cost of conducting the school." (Emphasis added.) The Hoohuli case is significant in two ways to this motion: First, the decision of the Ninth Circuit in Hoohuli, cannot be read as barring state taxpayers from challenging activities that have a detrimental effect on the public fisc or that add to the cost of conducting state programs. Second, this court's decision on remand, Hoohuli v. Ariyoshi, 631 F.Supp. 1153 (D. Haw. 1986) also noted at 1157 that OHA received revenue from the public land trust as well as appropriations by the legislature from the general fund but did not say the two non-Hawaiian plaintiffs could challenge only the tax expenditures and not the public land trust monies. Instead, it ruled on their constitutional challenge in toto. Then-Chief Judge Sam King said, at 631 F.Supp. 1159, fn 22, ". if plaintiffs were Caucasians challenging appropriations to both 'Hawaiians' and 'native Hawaiians,' 'strict scrutiny' might be the appropriate standard." This is persuasive authority that if the Hoohuli taxpayer plaintiffs had challenged the OHA laws in toto, as Plaintiffs do in this case, they would have had their day in court. Supreme Court decisions. Although many millions of taxpayer dollars have been and continue to be regularly appropriated from the General Fund for both Hawaiian Homes and OHA, that is only a part of the injury to taxpayers' pocketbooks. The Court's decision in this case would not be fully informed without considering the full magnitude of damage these two programs inflict on the State fisc, and therefore on Plaintiffs' pocketbooks. The Supreme Court has adjudicated a number of state taxpayer cases where the challenged conduct harmed the State fisc in ways which did not involve the direct expenditure of state tax dollars. Asarco. In Asarco v. Kadish, 490 U.S. 605 (1989) taxpayers filed suit in the Arizona court challenging Arizona's leasing of minerals and school trust lands without complying with the bidding and appraisal requirements of the State's enabling act. Pursuant to the 1910 Enabling Act for Arizona, the United States granted four sections of land in each township to Arizona. Almost ten million acres were granted. The land could be used only for the support of the common schools of the state (school trust lands) and for internal improvements to the state. The enabling act required that before leasing such lands, they be advertised and appraised. Kadish v. Asarco, 155 Ariz. 484, 486 747 P.2d 1183, 1185 (1987) The Arizona statute, subsequently enacted, required every such lease to provide for the payment by the lessee of a royalty of 5% of the net value of the minerals produced but it did not require the lands to be advertised or appraised before the lease and did not require the lands to be leased at their full appraised value. 490 U.S. at 627. The plaintiffs were three individual taxpayers, Frank and Lorain Kadish and Marion L. Pickens, and the Arizona Education Association, a non-profit corporation. The original Defendants were the Arizona State Land Department, the State Land Commissioner in his official capacity and Cyprus Pima Mining Company, a mineral lessee. ASARCO Incorporated, a New Jersey corporation, and other mineral lessees intervened. The trial court eventually certified the case as a defendant class action. The class consisted of all present and future mineral lessees of state lands. The plaintiffs' complaint, III, alleged that the Arizona statute governing mineral leases has "deprived the school trust funds of millions of dollars thereby resulting in unnecessarily higher taxes." The association and its members contended that the state law "imposes an adverse economic impact" on them. Complaint IV. The trial court entered summary judgment for Defendants. Plaintiffs appealed. The Arizona Supreme Court reversed and remanded. The intervening Defendants sought and were granted certiorari. The U.S. Supreme Court held that the Arizona statute governing mineral leases of state lands was void and affirmed the judgment of the Arizona Supreme Court. Four of the Justices expressed the view that the suit would have been dismissed at the outset if federal standing-to-sue rules applied (reasoning that state taxpayer suits should be barred by the same rules as federal taxpayer suits). Four other justices disagreed with that view. The ninth justice, Justice O'Connor, took no part in the consideration or decision. The result of the Supreme Court's decision was to uphold the judgment in favor of the plaintiffs, Arizona taxpayers and a teachers association, whose only complained-of injury was the leasing of mineral deposits in school trust lands at below fair market rentals in violation of the Arizona enabling act. If the Supreme Court had allowed taxpayers to challenge only direct expenditures of tax dollars in Asarco, it would have either reversed the Arizona Supreme Court (because the below-market mineral lease did not cost the plaintiff taxpayers a dime of tax money) or it would have dismissed the petition for certiorari for lack of Article III jurisdiction (because the taxpayers did not allege any direct injury caused by expenditure of taxpayer funds). Other Supreme Court decisions. As the Sixth Circuit pointed out in Johnson v. Economic Development, 241 F.3d 501, 507 (6th Cir. 2001), the Supreme Court has decided several state taxpayer cases involving Establishment Clause challenges to tax exemptions as they relate to religious entities. See e.g., Walz v. Tax Comm'n, 397 U.S. 664, 90 S.Ct. 1409, 25 L.Ed.2d 697 (1970) (property tax exemption for churches); Hunt v. McNair, 413 U.S. 734, 93 S.Ct. 2868, 37 L.Ed.2d 923 (1973) (tax exemption for state issued revenue bonds, some of which went to religiously affiliated schools); Mueller v. Allen, 463 U.S. 388, 103 S.Ct. 3062, 77 L.Ed.2d 721 (1983) (state income tax deduction for school expenses where some of taxpayers' children attended religious schools). In none of those cases, did the plaintiffs allege or prove injury resulting from "direct expenditures of tax money by the legislature". Frothingham. In Frothingham v. Mellon, 262 U.S. 447, 43 S.Ct. 597 (1923) the court, while affirming the judgment dismissing plaintiff's federal taxpayer claim, explained why the rule is different for municipal taxpayers. The court said, at 262 U.S. 486, that resident taxpayers may sue to enjoin an illegal use of the moneys of a municipal corporation. (Citation omitted.) The interest of a taxpayer of a municipality in the application of its moneys is direct and immediate and the remedy by injunction to prevent their misuse is not inappropriate. It is upheld by a large number of state cases and is the rule of this court." Thus the Supreme Court in Frothingham states the rule for non-federal taxpayer standing, "upheld by a large number of states", as follows: The interest of a taxpayer of a municipality in the application of its moneys is direct and immediate and the remedy by injunction to prevent their misuse is not inappropriate. (Emphasis added.) That rule describes exactly what Plaintiffs seek in this case: To enjoin the misuse of the moneys of the State, tax moneys as well as other moneys in the State's treasury, including revenues from the Ceded Lands). Doremus. Doremus v. Board of Education held that the plaintiffs lacked taxpayer standing to challenge the school district's practice of reading five verses from the Old Testament at the opening of each public school day as a violation of the Establishment Clause. 342 U.S. at 433-35. The plaintiffs did not have standing, the Court concluded, because they failed to allege a "good-faith pocketbook" injury, i.e., that there was a "financial interest that is, or is threatened to be, injured by the unconstitutional conduct." Id. at 434-35. Therefore, the question as framed by Doremus is whether state taxpayers have a "financial interest that is, or is threatened to be, injured by the unconstitutional conduct." Applied to this case, the question is whether Plaintiffs as taxpayers have a financial interest in the State fisc that is, or is threatened to be, injured by State officials' below-market rentals under the Homestead leases and the diversions of public lands and revenues to DHHL and OHA and the loss of interest and investment income on public moneys paid to and held by those two State agencies. Ninth and other circuit decisions. In Doe v. Madison School District, 177 F.3d 789 (9th Cir. 1999), the Ninth Circuit, en banc, reviewed the rules of taxpayer standing. In the first paragraph under the heading "Standing" at 177 F.3d 793 the court cites Fuller v. Volk, 351 F.2d 323, 327 (3d Cir.1965) ("[T]he taxpayer must be shown to be suing to prevent a misuse of public funds for this is the only interest which a federal court can protect in a taxpayer's suit."). (Emphasis added.) In the next paragraph, the court notes that the Doe plaintiff has challenged the use of municipal and state (rather than federal) tax revenues. That being so, Doremus v. Board of Educ. of Borough of Hawthorne, 342 U.S. 429, 72 S.Ct. 394, 96 L.Ed. 475 (1952), controls the requirements for taxpayer standing in this case. See Cammack v. Waihee, 932 F.2d 765, 770 (9th Cir.1991) ("[T]he Doremus requirement of a pocketbook injury applies to municipal taxpayer standing as well as to state taxpayer standing."); Hoohuli v. Ariyoshi, 741 F.2d 1169, 1180 (9th Cir.1984) ("We are ... left with Doremus in its original form to guide us in questions of state taxpayer standing."). In Doe at 793-4 the Ninth Circuit says, citing Doremus, "To establish such a challenge, a plaintiff must demonstrate that the "activity is supported by any separate tax or paid for from any particular appropriation or that it adds any sum whatever to the cost of conducting the school." Id. at 433, 72 S.Ct. 394. (Emphasis added.) At 796 the en banc decision cites with approval, Schneider v. Colegio de Abogados de Puerto Rico, 917 F.2d 620 (1st Cir.1990), saying the First Circuit held that a taxpayer lacked standing to challenge a statute requiring that lawyers buy official stamps at government offices and affix them to court documents: In order to establish state taxpayer standing, plaintiffs must show that the challenged activity involves "a measurable appropriation" or loss of revenue, and "a direct dollars-and-cents injury" to themselves. (internal citations omitted.) Plaintiffs failed to make such a showing. The stamps are sold at government offices that exist for another purpose, and plaintiffs do not allege that additional employees are hired to handle the stamp business. (emphasis added.) Two years after the Ninth Circuit Court's en banc decision in Doe, the Sixth Circuit Court in Johnson v. Economic Development, 241 F.3d 501 (6th Cir. 2001) considered a state taxpayer's suit claiming the issuance of tax-exempt bonds violated the Establishment Clause and cost the Michigan treasury $68,000 in lost revenue from income tax that would have resulted from the interest on the bonds. The court said at 241 F.3d 507, contrary to Defendant's argument, the Supreme Court in Doremus did not distinguish between an expenditure and loss of revenue in determining whether there was a "good faith pocketbook injury". Under Doremus, state taxpayer standing simply requires that there is a "requisite financial interest that is, or is threatened to be, injured by the unconstitutional conduct." The court concluded that "Plaintiff has sufficiently established a financial interest that is threatened by this alleged Establishment Clause violation, thereby conferring state taxpayer standing. In Hawley v. Cleveland, 773 F.2d 736 (6th Cir. 1985), (cited with approval in Cammack, supra) taxpayers sued the City of Cleveland to enjoin the leasing of space in an airport to a church for use as a chapel. The court noted at 773 F.2d 742 that the Supreme Court continues to allow suits by nonfederal taxpayers to enjoin unconstitutional acts affecting public finances. The court concluded, "It thus appears that a question of material fact exists as to whether the rental of the space for the chapel to the diocese at the agreed-upon price could harm Cleveland's fisc." (Emphasis added.) Thus, the Supreme Court has adjudicated state taxpayer suits where the only injury claimed by the state taxpayer was loss of revenue by: mineral leases of school trust lands without advertising and appraisals (Asarco); property tax exemptions for churches (Walz); tax exemptions for revenue bonds (Hunt), and state income tax deductions where some of taxpayers attend religious schools (Mueller). None of those cases involved the "direct expenditures of tax money by the legislature." Similarly, the rule stated by the Supreme Court in Frothinghan allows a municipal taxpayer to sue to enjoin an illegal use or the misuse of the moneys of the municipality without any requirement of showing "direct expenditures of tax moneys." The rule as stated in Doremus permits state taxpayers with "a financial interest that is, or is threatened to be, injured by the unconstitutional conduct" to challenge such unconstitutional conduct. The Ninth Circuit en banc in Doe says state taxpayers have standing to challenge "a misuse of public funds" (citing Fuller from the 3rd Circuit); that under Doremus taxpayer plaintiffs may challenge any activity "that adds any sum whatever to the cost of conducting the school"; and cites with approval the decision of the First Circuit in Schneider that plaintiffs may establish state taxpayer standing by showing that the challenged activity involves a measurable appropriation or loss of revenue. The Sixth Circuit has allowed a state taxpayer suit challenging the issuance of tax-exempt bonds which caused $68,000 in lost revenue (Johnson) and in another case stated that taxpayer plaintiffs may challenge any activity "that adds any sum whatever to the cost of conducting the school" and noted that the Supreme Court continues to allow nonfederal taxpayers to enjoin unconstitutional acts affecting public finances such as leases at rents which could harm Cleveland's fisc. Economic reality; Analogy to stockholder of private corporation. These decisions merely reflect the economic reality that the bottom line, the State's net income after expenses, can be affected, among other ways, by improperly increasing expenditures or by improperly decreasing revenues. In state and county finances, the bottom line determines the amount of taxes that must be paid each year by taxpayers. In September 2002, the Auditor, State of Hawaii reported to the Governor and Legislature that the DHHL management is ineffective. Outstanding loans and guaranteed loans with outside lenders are improperly managed. Its inability "could cost the State and Hawaii taxpayers millions of dollars." Financial Audit of the DHHL, Report No. 02-13 September 2002, The Auditor State of Hawaii at 11 attached as Exhibit C to Plaintiffs' motion filed September 17, 2002. As the Supreme Court said in Frothingham at 486, "The reasons which support the extension of the equitable remedy to a single taxpayer in such cases are based upon the peculiar relation of the corporate taxpayer to the corporation, which is not without some resemblance to that subsisting between stockholder and private corporation. 4 Dillon, Municipal Corporations (5th Ed.) ง 1580 et seq." A private corporation must give equal treatment to all shares of the same class and must make its distributions without discrimination. Broad v. Sealaska, 85 F.3d 422, 426 (9th Cir. 1996); H.R.S. งง414-71 & 72. Because each share is entitled to equal treatment, every shareholder has a legally protected interest in the use or misuse of all the corporation's revenues and assets, not just in the capital he or she has contributed. If a corporate officer causes the corporation to periodically distribute more dividends per share to favored stockholders than to others of the same class; or distributes and continues to distribute leases of corporate lands to select stockholders at below market rents; or causes and continues to cause the corporation to issue bonds and to distribute the bond proceeds only for the benefit of certain favored stockholders but not for other stockholders of the same class, the disfavored stockholder, in every such case, has a cause of action for declaratory and injunctive relief just as much as if the officer had stolen moneys contributed by stockholders. Thus, damage to the public fisc can be caused by unconstitutional diversion of revenues from public lands and by leasing public lands at below-market rents for unconstitutional purposes as well as by unconstitutional expenditures of tax moneys. Whatever unconstitutional device is used to inflict harm on the public fisc, whether by improperly increasing expenditures or improperly decreasing revenues or by issuing bonds for unconstitutional purposes or by any activity that improperly affects public finances or harms the State's fisc or improperly adds any sum whatsoever to the cost of conducting the State's affairs, the injury to taxpayers' pocketbooks can be just as real and concrete and particularized. Under the law as enunciated by the Supreme Court and the Ninth Circuit, state taxpayers have the right to challenge such improper programs and activities in federal court and to seek declaratory and injunctive relief to prevent their recurrence.

If the Court declines to free Plaintiffs from the "standing" restrictions, Plaintiffs request certification under Rule 54(b) to allow an appeal from the Standing Order while the determination of the remaining issues continues in this court. Without that certification, this case will continue to languish, burning time and money (both of which for Plaintiffs are private and scarce; and for Defendants are abundant and provided by taxpayers). The restricted standing imposed by the Court will continue to generate unnecessary discovery disputes, which are magnified here because simply finding out whether the public land trust produces a net income or loss and whether the general fund actually finances the payments to OHA and Hawaiian Homes, are zealously guarded from disclosure by the State even though it has a fiduciary duty to account as trustee. This case was commenced in March 2002. Since then it has been 19 months on the back burner; "standing" decisions and re-decisions and bifurcation decisions and re-decisions and motions denied without prejudice to refilling on the same grounds and scheduling orders continued and continued again, all the while Plaintiffs being forbidden to move for summary judgment, tens of millions of taxpayer dollars continue to pour down the drain for discriminatory purposes and no end in sight. All parties recognize that because of its significance, whatever the outcome at the trial level, this case will be appealed. It is in everyone's interest that the record before this court and the reviewing courts be complete so that a fully informed and just decision will ultimately be reached. Plaintiffs would never seek interlocutory appeal of a "standing" order if there was a reasonable prospect of a just and speedy and inexpensive determination at the trial level (as required by F.R.C.P. Rule 1). Plaintiffs have reluctantly come to the conclusion that, because of the restrictive "Standing Order" and resultant restrictive discovery, it is unlikely that a complete record can be achieved; this case will not reach final judgment for over a year, perhaps longer; the first appeal will not have the benefit of a complete record; the appellate court will likely only be able to reverse the Standing Order and have to remand; and Plaintiffs, or at least those still alive, will be back at square one two or three years from now.

For the reasons set forth above, Plaintiffs request that the Court vacate the restrictions and accord Plaintiffs the full scope of standing generally accorded to state taxpayers: The right to challenge any measurable sum of public funds to further a challenged program or activity and any loss of revenue attributable to the challenged program or activity. If the Court declines to do so, Plaintiffs ask the Court to certify the Standing Order under F.R.C.P. Rule 54(b).