Court hears claims in lawsuit over church use of Hawaii school facilities

A 7-year-old lawsuit alleging that two Hawaii churches defrauded the government by using public school facilities without paying proper rent will drag on well into next year.

At a hearing Friday before Circuit Judge Lisa Cataldo in Honolulu, attorneys for defendants One Love Ministries and Calvary Chapel Central Oahu argued that the case should be dismissed.

“This is not properly a fraud case, your honor,” said Ken Connelly, legal counsel for Alliance Defending Freedom, which is representing the churches. “Plaintiffs are trying to force a square peg into a round hole.”

“After seven years of litigation and discovery into the facts … the time has come for plaintiffs’ crusade against defendant churches to end,” the churches’ attorneys argued in their filing.

But a ruling on their motion in Kahle v. One Love Ministries is not expected until possibly May or June because the judge in the case is being reassigned to the Family Court criminal calendar for several months.

Mitchell Kahle and Holly Huber initially brought suit against five local churches in 2013, saying they owed the Department of Education more than $5 million for underpaid rental fees and utilities charges for using school facilities for services and special events over six years.

The churches said they had paid whatever the schools charged them and also donated equipment and volunteered time to improve the campuses.

Three of the churches — New Hope Oahu, New Hope Hawaii Kai and New Hope Kapolei — were dropped from the lawsuit in 2014. Their umbrella church, the International Church of the Foursquare Gospel, admitted no wrongdoing and agreed to pay a $775,000 settlement that benefited the schools rather than engage in a long legal battle.

Kahle and Huber then filed an amended complaint in 2014 against only One Love Ministries and Calvary Chapel Central Oahu. It alleged the two churches had underpaid the Department of Education hundreds of thousands of dollars to rent facilities at Kaimuki and Mililani high schools, where they held church services and special events.

The case has taken a long time in part because the churches appealed to the Intermediate Court of Appeals after a Circuit Court judge issued a decision that denied in part and granted in part their attempt to dismiss the case.

Connelly told the court Friday that Kahle and Huber’s complaint doesn’t qualify under Hawaii’s False Claims Act because it relies on public documents rather than insider information.

“They decided to saddle the church with a fraud case on contracts that were openly entered into between school officials and the churches,” he said. “The plaintiffs are essentially arguing in this case that the government defrauded itself.”

The False Claims Act, or whistle-blower law, allows private citizens to bring legal action on behalf of the government if they know of fraud that caused the state to lose money. Defendants found liable may be ordered to pay three times actual damages, and the whistleblower may receive a portion of the funds.

“Plaintiffs are not and never have been insiders bringing forth unknown information of fraud to an unwitting government,” the church attorneys wrote in their filing. “They are rather political activist outsiders who disliked what they deemed churches’ ‘monopolistic’ participation in Hawaii’s Community Use Program, and decided to launch an ‘investigation’ in the hopes that such use might be curtailed or eliminated by the Hawaii Department of Education.”

But attorneys James Bickerton and Stephen Tannenbaum, representing Kahle and Huber, said the couple uncovered the wrongdoing through their own yearlong investigation and do qualify to bring the fraud claim.

The pair obtained copies of school rental contracts, perused church websites and emails regarding school facilities use, talked to school officials and visited campuses on weekends to build their case.

“Our clients discovered it (wrongdoing) through non- public sources and they have direct and independent knowledge of it that they derived from their investigation,” Bickerton said.

The lawsuit contends that the churches underreported the hours they used the facilities, paid discounted rates through private deals or simply didn’t bother to fill out a rental form and helped themselves to facilities since they had the keys.

“Each of those three categories — underreporting, nonreporting or underpayment based on a private, secret deal with the vice principal — all necessarily implicate an absence of information, not something that was out there in the public realm,” Tannenbaum said.

Hawaii’s Community Use of Schools Facilities program has legal requirements, fees are mandatory and donations in lieu of rent are prohibited, the plaintiffs’ attorneys wrote in their filing.

Since the lawsuit, some Hawaii churches have continued to use public school facilities for services on weekends under contracts signed with school officials. During the coronavirus pandemic, however, schools are not renting out their facilities.

The judge instructed the parties to file proposed findings of fact and conclusions of law in the case by March 19 and any responses by April 19.

Kahle, founder of Hawaii Citizens for the Separation of State and Church, and Huber attended the hearing, as did Elias Storhaug, pastor of Calvary Chapel Central Oahu, and Gary Rosolowich, executive director of One Love Ministries. The session was held via videoconference.