The Lahaina Recovery Fund

by Tom Yamachika, President, Tax Foundation Hawaii

One of the more innovative items announced by the Governor's office when it comes to disaster relief measures is the creation of a Lahaina Recovery Fund.

In a press release announcing the measure, the Governor’s Office said that the concept was similar to the 9/11 Fund created in the aftermath of the destruction of the World Trade Center. The idea is that the government, Hawaiian Electric, Kamehameha Schools, and others who might be facing lawsuits would pay into the fund. Claimants who want a distribution from the fund agree not to sue the fund contributors.

It was a controversial enough plan that the Star-Advertiser conducted an informal “Big Q” online poll to see if its readers thought the fund was a good idea. (As of this writing, supporters were a little more than twice the number of detractors.)

Typical of the opposition was this post on X: “So in other words, what our state government deems is the value of your loss is all you will receive because you sign your rights away to sue for more?!? DON’T DO IT #LAHAINA!”

In a previous column, we urged the government to create this type of fund. The primary advantages are (1) claimants get money in months, not years; (2) claimants typically won’t have to contend with attorneys’ fees, which could otherwise be a huge amount like a third of the recovery; and (3) people can get on with their lives instead of worrying about discovery, depositions, trial, and possible appeals.

The fund being proposed has a voluntary participation element, like many class actions. If someone thinks that they can get a better result by suing, they are certainly free to do so.  And even for folks who sue, it’s tough to get past the idea that the payment will “be a payment of the State’s choosing.”  After all, if there is a settlement of any kind (90% of litigated court cases are settled), the government will have to sign off on the payment because it would be a defendant in the litigation.

Those who want to be purists about it would need to settle in for the long haul. Take-no-prisoners litigation would need at least a couple of years to get to trial. Many more years could be added to that if appeals follow. Those purists will be waiting a long time for their money.

So, how much is each participant going to get if they opt into the fund?  The exact amount isn’t known at this point. This is because negotiations are still ongoing with the potential defendants who would be putting money into the fund, and folks don't yet have a clear idea of how many people would be participating. This is not unusual even for mass tort litigation and other class actions.  The Governor says that the amount per participant will be north of $1 million. Obviously, this is not a case where the government is trying to get people to sign off for a pittance like 20 bucks in some preloaded gift card. This is serious money and should be considered by the claimants seriously.

People who are thinking about being a possible claimant of the fund need to thoughtfully consider the dollar amount, whether the claimant could do better if he or she filed a lawsuit, and the cost of that lawsuit. Attorneys don’t come cheap, and a “contingency fee” where the attorney is paid only if there is a recovery may cost a third (or more) of the total recovery. Add to that the uncertainty of when, or if, litigation recovery will be paid. The recovery fund, in contrast, will be ready to pay out in months, not years.

Maui claimants can be the adults in the room. They can and should make their own choices about their own future. There is no one-size-fits-all approach to a Lahaina claim. We congratulate the Governor’s office for putting this option on the table.