A legal dispute between two Hawaii state agencies came to an end Wednesday with a state Supreme Court ruling in favor of the Office of Hawaiian Affairs over the Office of the Auditor.

In its unanimous ruling, the court said OHA has the right to withhold from the state auditor communications between the agency and its legal counsel that are covered by attorney-client privilege.

The dispute goes back to 2019 when state Auditor Leslie Kondo was conducting his state Legislature-­mandated audit of OHA’s limited liability corporations.

After OHA refused to give Kondo unredacted minutes of board of trustees closed-door executive sessions on the subject, the auditor announced he would put the audit on hold, saying that unless he had access to the unredacted minutes there was a good chance the findings would be based on “improper or incomplete information.”

The suspension of the audit resulted in a $3 million state allocation of 2020-21 general funds to OHA being put on hold because the Legislature conditioned the release of the money on completion of the audit.

In response, OHA in 2020 took the auditor to court, saying he had no right to demand privileged attorney-­client communications. After a Circuit Court judge ruled in favor of OHA later that year, Kondo appealed. And when OHA asked the state’s highest court to take the case, it agreed.

In the meantime, the state Legislature in 2021 restored the funding held back because of the incomplete audit and allocated an additional $200,000 to OHA to complete a follow-up of a separate independent audit of OHA.

In his court filings, Kondo argued that state law empowers his office to review all OHA records without exception. OHA must comply, he said, because it is a state agency.

OHA countered that handing over its privileged communications without a court order constitutes a voluntary disclosure and waives the attorney-client privilege.

The high court agreed with OHA, saying that the state law that empowers the auditor does not trump the sanctity of attorney-client privilege. The 24-page opinion suggested Kondo should have used his office’s subpoena power to try to compel the redacted material.

OHA Chairwoman Carmen “Hulu” Lindsey issued this statement following Wednesday’s ruling:

“The OHA Board of Trustees is extremely pleased with today’s unanimous decision from the Hawai‘i Supreme Court in the appeal brought by the State Auditor. OHA was confident that the Court would affirm the trial court’s decision that the State Auditor overreached in its request to access and review attorney- client privileged communications between OHA and its legal counsel.

“Today’s decision preserves the sanctity of the attorney-client privilege, which is critical to the Trustees’ fulfillment of their fiduciary duties to our Native Hawaiian people.”

The court’s opinion follows another audit from Kondo’s office critical of OHA. The new audit, released last month, found that OHA’s approach to real estate has been “ad hoc” and “risky,” absent of a strategy and other policies necessary to help guide the agency into making wise decisions, maximizing its resources and minimizing risk to its trust assets.

Asked about his legal dispute with OHA, Kondo said the litigation had no influence on last month’s audit.