The Hawaii Supreme Court held that the Office of the Auditor for the state does not have the authority to pierce the veil of attorney-client privilege and obtain the confidential communications of the Office of Hawaiian Affairs.

According to the opinion, the two constitutionally-created state agencies found themselves at odds over two laws—a section of the Hawaii Revised Statutes and a law concerning attorney-client privilege. The Office of the Auditor believes that HRS Section 23-5 entitles it to receive all records of an auditee, including attorney-client communications, protected by Hawaii Rules of Evidence (HRE) Rule 503. But the Office of Hawaiian Affairs, the subject of the audit, sued, arguing that attorney-client privilege overcomes the authority of the auditor and preserves the confidentiality of those communications.

Justice Todd W. Eddins, in his written opinion, stated that the state’s high court disagreed that the auditor had the authority to obtain the confidential communications and rejected the contention that the Office of the Auditor’s jurisdiction and non-justiciability bars the suit.

Chief Justice Mark E. Recktenwald and Associate Justices Paula A. Nakayama, Sabrina S. McKenna, and Michael D. Wilson joined Eddins.

The Hawaii Legislature passed Act 37, or the Office of Hawaiian Affairs Appropriations Act of 2019, which conditioned the release of general funds from OHA upon receipt of an audit report, according to the opinion. Defendants Leslie H. Kondo, and the State of Hawaii Office of the Auditor, began the audit of the Office of Hawaiian Affairs and the Board of Trustees of the Office of Hawaiian Affairs.

According to the opinion, the auditor asked for records including unredacted executive session minutes from the OHA. Since those minutes contained privileged attorney-client communications, the OHA suggested that they provide the auditor redacted minutes, according to the opinion,

“This dissatisfied the Auditor,” said Eddins. “The Office of the Auditor has unlimited power to access all OHA records, he told OHA.”

The two agencies continued to disagree, resulting in a stalemate, according to Eddins.

“Then the Auditor packed up his audit, explaining in a late December 2020 letter to OHA that he could not finish the audit without OHA’s attorney-client communications,” stated Eddins.

Before suspending the audit, Kondo told the OHA that he had “‘the ability to if necessary to subpoena records, or subpoena people’” but that “‘I don’t believe we ever need to pull that trigger for a State Agency. I believe a State Agency must cooperate,’” the opinion said.

Eddins called the auditor’s decision not to subpoena the records “odd” as the legislature has given him the power to do so.

As a result of the incomplete audit, the OHA did not receive its general funds. But the legislature ultimately amended Act 37 to allow the funds the be released. In the time between the audit suspension and the release of the funds, the OHA sued Kondo and the Office of the Auditor. In a two-count complaint filed in February 2020, the OHA sought for declaratory relief in the Circuit Court of the First Circuit.

The first count, which was dismissed by the circuit court, sought a declaratory judgment that the auditor violated Act 37 by failing to submit an audit. The second sought declaratory judgment “that neither HRS Chapter 23 nor the Hawaii State Constitution requires OHA to disclose to the State Auditor privileged attorney-client communications protected from disclosure,” the opinion said.

“The circuit court sided with OHA, granting its motion for summary judgment and denying the auditor’s motion for judgment on the pleadings,” stated Eddins.

“The Auditor contends that HRS § 23-5 and HRE Rule 503 do not conflict,” stated Eddins. “And because there is no conflict, the Auditor’s superior powers snap the attorney-client privilege.”

Eddins rejected those arguments and held that unless an audit’s subject waives attorney-client privilege, or a court orders disclosure, the Office of the Auditor may not access the privileged communications. The opinion went on to state that the two laws in this case do not conflict.

“The Auditor’s powers and the attorney-client privilege can coexist,” said Eddins. “The laws are not explicitly contrary or inconsistent. And courts, like the circuit court here, can read HRE Rule 503 and HRS § 23-5 in harmony, giving effect to both statutes. The laws do not need to incompatibly collide.”

Eddins stated that OHA argued that if it caves to the auditor absent a court order, then attorney-client privilege would be waived. But the auditor insisted that OHA doe not waive privilege by giving him the requested records.

“If Kondo promises OHA he won’t tell anybody, his argument seems to run, then OHA hasn’t waived the privilege and should hand over its attorney-client communications,” said Eddins.

The justice again disagreed with the auditor, stating that just because the auditor, “shall not be required to disclose” records does not mean he will not do so. Eddins said that there is no assurance in HRS Section 23-5 that any “involuntary” disclosure will withstand challenge and remain confidential.

“With no protection, OHA’s counsel made the right call—the only one consistent with a lawyer’s professional and ethical obligations,” said Eddins.

The state high court affirmed the order by First Circuit Judge Jeffrey Crabtree granting OHA’s motion for summary judgment and denying the auditor’s motion for judgment on the pleadings.

Neither counsel for Kondo and the Office of the Auditor, Douglas S. Chin of Starn, O’Toole, Marcus & Fisher, nor counsel to the OHA, Kurt W. Klein of the Klein Law Group, immediately responded to a message seeking comment.

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