A state appeals court has thrown out a lower-court ruling that the Hans Hedemann Surf School is violating city land use laws by operating out of the New Otani Kaimana Beach Hotel in Waikiki.

In a recent opinion, the Intermediate Court of Appeals ruled that the city Department of Planning and Permitting's director was within his power when he determined that the surf school was a permitted use at the hotel. The director granted conditional approval of the school in 2004 and the decision was upheld in March 2005 by the city Zoning Board of Appeals.

The rulings were made after two residents and two citizens' groups petitioned the city to declare that the school was an illegal use of the hotel office space. Following the rulings, Mike Beason, Richard Quinn, Save Diamond Head Waters LLC and Kapi'olani Park Preservation Society LLC filed an appeal in state Circuit Court.

The parties argued that the surf school was an "unlawful expansion" that had an "adverse effect on its neighboring properties."

The plaintiffs also complained about alleged noise, congestion, vandalism, trespassing and parking issues caused by the surf school.

In February 2006, Circuit Judge Eden Hifo agreed with the plaintiffs and said the director's ruling was "arbitrary and/or capricious and constituted an abuse of discretion."

Hedemann appealed Hifo's decision and last week the ICA ruled in favor of the longtime professional surfer and the city. The court said that approval was "within the discretion of the director."

Quinn said yesterday that he had not heard of the court's ruling and could not comment. Beason could not be reached for comment.

Dane Miller, attorney for the plaintiffs, said he has yet to discuss the ruling with his clients and could not say whether they will file an appeal with the state Supreme Court.

"We'll review our options to see where we'll go," Miller said. "Of course we're disappointed because we would prefer to have the Circuit Court ruling upheld. There is probably good grounds to ask the Supreme Court to look at this again. The ICA clearly saw this differently from the Circuit Court judge, and we think that the Circuit Court judge was correct in her ruling."

Hedemann yesterday said the ruling was "good news" and he never believed that his business was operating illegally. But he said the decision will have little impact because he has since moved his operations to the Park Shore Waikiki Hotel.

Hedemann said he still has the office at the New Otani hotel that caters to hotel guests on a small scale, but he said he no longer takes large groups of customers there.

"In the long run, we want to be sensitive to the people who live out there," he said.