162 P.3d 696 (Hawai'i 2007), 26178, Kaho'ohanohano v. State
|Citation:||162 P.3d 696, 114 Hawai'i 302|
|Opinion Judge:||Opinion of the Court by ACOBA, J.|
|Party Name:||George KAHO' OHANOHANO, Loren Andrade, State of Hawai'i Organization of Police Officers (SHOPO), Pauline Efhan, and Norma Caravalho, Plaintiffs-Appellants/Cross-Appellees and Jackie Ferguson-Miyamoto, Henry F. Beerman, Odetta Fujimori, Darwin J. Hamamoto, Pilialoha E. Lee Loy, Alton Kuioka, Colbert M. Matsumoto, and Georgina Kawamura in their offic|
|Attorney:||Mark S. Davis and Michael Livingston (Davis Levin Livingston Grande); Peter Gruenstein (pro hac vice) (Gruenstein & Hickey); Peter J. Maassen (pro hac vice) (Ingaldson Maasen, P.C.); and Will Aitchison (pro hac vice) (Aitchison & Vick, Inc.) for Plaintiffs-Appellants/Cross-Appellees., Robert Bruc...|
|Case Date:||July 23, 2007|
|Court:||Supreme Court of Hawai'i|
APPEAL FROM THE FIRST CIRCUIT COURT, (CIV. NO. 02-1-1001)
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
[114 Hawai'i 309] Mark S. Davis and Michael Livingston (Davis Levin Livingston Grande); Peter Gruenstein (pro hac vice) (Gruenstein & Hickey); Peter J. Maassen (pro hac vice) (Ingaldson Maasen, P.C.); and Will Aitchison (pro hac vice) (Aitchison & Vick, Inc.) for Plaintiffs- Appellants/Cross-Appellees.
Robert Bruce Graham, Jr. and James K. Mee (Ashford & Wriston) for Intervenor Plaintiffs-Appellants/Cross- Appellees.
Clyde W.M Matsui and Archie T. Ikehara (Matsui Chung Sumida & Tsuchiyama) for Defendant-Appellee/ Cross-Appellee/Cross-Appellant State of Hawai'i.
Paul A. Schraff, Special Deputy Corporation Counsel (Dwyer Schraff Meyer Jossem & Bushnell) for Intervenor Defendant-Appellee/Cross- Appellant/Cross-Appellee City and County of Honolulu.
Margaret Hanson, Deputy County Attorney, County of Kauai for Additional Defendant-Appellee/ Cross-Appellee/Cross-Appellant County of Kauai.
Cheryl Tipton, Deputy Corporation Counsel, County of Maui for Additional Defendant-Appellee/Cross- Appellee/Cross-Appellant County of Maui.
Katherine A. Garson and Joseph K. Kamelamela, Deputies Corporation Counsel, County of Hawai'i, for Additional Defendant- Appellee/Cross-Appellee/ Cross-Appellant County of Hawai'i.
[114 Hawai'i 310] ACOBA, J.
We hold, in this appeal by Plaintiffs-Appellants/Cross-Appellees George Kaho'ohanohano (Kaho'ohanohano), Loren Andrade (Andrade), Pauline Efhan (Efhan), Norma Caravalho (Caravalho), and the State of Hawai'i Organization of Police Officers (SHOPO) [collectively, Plaintiffs] and Intervenor Plaintiffs-Appellants/Cross-Appellees Jackie Ferguson-Miyamoto, Henry F. Beerman, Odetta Fujimori, Darwin J. Hamamoto, Pilialoha E. Lee Loy, Alton Kuioka, Colbert M. Matsumoto, and Georgina Kawamura, in their official capacities as Trustees of the Employees' Retirement System of the State of Hawai'i (ERS) [collectively, Trustees], from the June 24, 2003 judgment of the first circuit court (the court) 2 in favor of Defendant-Appellee/Cross-Appellee/Cross-Appellant State of Hawai'i (the State) and against Plaintiffs and Trustees, that (1) Plaintiffs lack standing to seek declaratory and injunctive relief, and damages, regarding Act 100 of the 1999 Hawai'i legislative session, see 1999 Hawai'i Sess. L. Act 100, § 1 at 368 [hereinafter, Act 100], as codified under Hawai'i Revised Statutes (HRS) § 88-107 (Supp. 2006), (2) Trustees have standing to seek declaratory and injunctive relief from the court regarding Act 100, (3) the arguments raised by the State as to Trustees concerning ripeness, mootness, the political question doctrine, sovereign immunity, and the statute of limitations are unpersuasive, (4) Act 100 violates article XVI, section 2 of the Hawai'i Constitution 3 which prohibits the impairment of accrued benefits of ERS members, inasmuch as (a) the Proceedings of the 1950 Constitutional Convention of Hawai'i indicate that article XVI, section 2 was intended to ensure that the State and local governments provide a sound retirement system for their employees; (b) the proceedings sought to confirm that the retirement system would fulfill its obligations into the future; (c) necessarily implied in article XVI, section 2 prohibiting impairment of accrued benefits is the protection of the sources for those benefits; (d) Act 100 retroactively divested the ERS of $346.9 million of employer contributions for 1997, 1998, and 1999, thereby eliminating the sources used to fund constitutionally protected "accrued benefits"; and (e) Act 100 undermined the retirement system's continuing security and integrity; (5) article XVI, section 2 of the Hawai'i Constitution is patterned after the New York system, and New York case law similarly requires that the sources of ERS benefits be protected; and (6) other relevant jurisdictions hold similarly. Plaintiffs also challenge the court's June 24, 2003 order granting summary judgment in favor of the State and denying Plaintiffs' two motions for partial summary judgment that were filed on October 1, 2002.
Accordingly, as to Plaintiffs, the court's June 24, 2003 final judgment entered in favor
[114 Hawai'i 311] of the State and against the Plaintiffs is remanded to the court with instructions to enter an order dismissing the Plaintiffs' claim for lack of jurisdiction.
As to Trustees, we vacate the court's June 24, 2003 judgment and remand this matter to the court. The court is instructed to enter summary judgment against the State and in favor of Trustees on Trustees' declaratory judgment claim that Act 100 violated article XVI, section 2 of the Hawai'i Constitution. See Univ. of Hawai'i v. City & County of Honolulu, 102 Hawai'i 440, 443-44, 77 P.3d 478, 481-82 (2003) (" '[A] court may enter judgment for the non-moving party on a motion for summary judgment where there is no genuine issue of material fact and the non-moving party is entitled to judgment as a matter of law.' " (Quoting Konno v. County of Hawai'i, 85 Hawai'i 61, 76, 937 P.2d 397, 412 (1997) (Brackets in original.) (Other citation omitted.)). We remand to the court Trustees' other claims for declaratory relief raised in Trustees' Complaint in Intervention (complaint) for disposition as appropriate. The injunctive relief sought by Trustees shall not issue under the circumstances of this case, inasmuch as "the prospective injunctive relief requested by [Trustees] would not appear to be necessary in view of our explication of the applicable law[.]" Rees v. Carlisle, 113 Hawai'i 446, 459, 153 P.3d 1131, 1144 (2007).
The ERS provides retirement benefits to State and county employees, who become members upon their entry or reentry into service of the State or any county. HRS §§ 88-22 (1993), 88-42 (1993). Chapter 88 of the HRS governs the operation of the ERS and vests "general administration and the responsibility for the proper operation" in Trustees. HRS § 88-23 (Supp. 2002). The system is funded by contributions from State and county employers, as well as State and county employees. See e.g., HRS §§ 88-45 (Supp. 2006), 88-122 (Supp. 2006), 88-123 (Supp. 2002), 4 88-125 (Supp. 2002). Pursuant to HRS § 88-127 (1993), Trustees must hold the ERS funds "in trust . . . for the exclusive use and benefit of the system and for the members of the system" and those funds "shall not be subject to appropriation for any other purpose whatsoever." (Emphasis added.) "The assets of the system are assigned to . . . (1) [t]he annuity savings fund; (2) [t]he pension accumulation fund; 5 and (3) [t]he expense fund." HRS § 88-109 (Supp. 2006).
"Pursuant to HRS § 88-22, the ERS possesses the full 'powers and privileges of a corporation . . . and by [its] name may sue or be sued, transact all of its business, invest all of its funds, and hold all of its cash and securities and other property.' " Chun v. Bd. of Trs. of Employees' Ret. Sys. of the State of Hawaii, 87 Hawai'i 152, 162-63, 952 P.2d 1215, 1225-26 (1998) (citation omitted) (emphasis added). This court has further explained that "pursuant to HRS § 88-23, '[t]he general administration and the responsibility for the proper operation of the [ERS] . . . are vested in [Trustees]; subject . . . to the area of administrative control vested in the department of budget and finance by HRS §§ 26-8 [(Supp. 2002)] and 26-35 [(1993)]." Id. at 163, 952 P.2d at 1226 (footnotes omitted) (some brackets in original and some added). In that regard then this court has described the powers and duties of Trustees as "functionally equivalent to those of the board of directors of a private corporation and are limited only by 'the area[s] of administrative control' reserved to the department of budget and finance by HRS §§ 26-8 and 26-35." Id. (quoting HRS § 88-23). 6
[114 Hawai'i 312] Pursuant to HRS chapter 88, Trustees owe a fiduciary duty to the retirement system itself, as well as to members of the system. Honda ex. rel. Kamakana v. Bd. of Trs. of the Employees' Ret. Sys., 108 Hawai'i 338, 344, 120 P.3d 237, 243 (2005) (hereinafter, Honda II). In Honda II, Trustees' fiduciary duties were described in the following manner:
HRS § 88-22 (1993), the statute establishing the ERS, provides that the retirement system "shall have the powers and privileges of a corporation." (Emphasis added.) It is axiomatic that a corporation's directors and officers assume fiduciary duties. See Chambrella v. Rutledge, 69 Hawai'i 271, 274, 740 P.2d 1008, 1010 (1987) (finding that plaintiffs-union members should not be precluded from equitable relief in an action against defendant nonprofit corporation for breach of fiduciary duties); Hawaiian Int'l Fin. v. Pablo, 53 Hawai'i 149, 153, 488 P.2d 1172, 1175 (1971) ("It is a well established rule both in Hawaii and in a majority of the [s]tates that the relation of directors to the corporations they represent is a fiduciary one."); Lum v. Kwong, 39 Hawai'i 532, 538 (1952) ("The relation of directors to corporations is a fiduciary one and the well-established rule both in Hawaii and in a majority of the states is that when fiduciaries deal with themselves relative to their trust property the burden is upon such fiduciaries to establish the fairness of the transaction."); Bolte v. Bellina, 15 Hawai'i 151, 153-54 (1903) ("Directors stand towards the corporation which they represent and act for in the relation of trustees to a cestui que trust.... They must act in good faith and for the interests of the stockholders whom they represent."); Lussier v. Mau-Van Dev., Inc., 4 Hawai'i App. 359, 381, 667 P.2d 804, 819 (1983) ("A corporate director or officer occupies a fiduciary capacity." (Internal quotation marks, brackets, and citations omitted.)). See also HRS §§ 414-221, -233 (1993) (delineating standards of conduct for corporate directors and officers).
. . . HRS § 88-23, which creates the ERS Board, vests the "general administration and the responsibility for the proper operation of the retirement system and for making effective the provisions of this part and part VII of this chapter . . . in a board of trustees[.]" (Emphasis added.) Trustees, by definition, are imbued with fiduciary duties. See Black's Law Dictionary 1514 (6th ed. 1990) (defining "trustee" as "[o]ne who holds legal title to property 'in trust' for the benefit of another person (beneficiary) and who must carry out specific duties with regard to the property. The trustee owes a fiduciary duty to the beneficiary." (Citing Reinecke v. Smith, 289 U.S. 172, 53 S.Ct. 570, 77 L.Ed. 1109 (1933))[.]
Id. at 343, 120 P.3d at 242 (emphases added).
Under HRS chapter 88, Trustees engage an actuary to determine the employers' normal cost and accrued liability contributions for each fiscal year. HRS §§ 88-122, 88-123. Trustees are responsible for calculating the annual contributions that the State and counties must pay into the ERS pursuant to HRS §§ 88-122 and -123. Trustees are to certify those amounts to the governor and the county councils, who must then include those amounts in their annual budgets. HRS §§ 88-124 (1993), 88-126 (Supp. 2002). Trustees must also allocate the ERS' earned
[114 Hawai'i 313] interest in accordance with HRS § 88-107 (Supp. 2006).
The State has historically mandated that Trustees apply earnings of the ERS funds in excess of a specified investment yield rate of eight percent to offset the employer contributions of the State and counties. See HRS §§ 88-107, 88-122, 88-127. This offset was coupled with a requirement that government employers pay any additional amount needed to meet the specified yield rate if earnings were not sufficient to meet the rate in a particular year. see 1925 Hawai'i Sess. L. Act. 55, § 7 at 63. Trustees state that "[i]n other words, excess investment earnings in 'peak' years might [have been] used to offset future employer contributions if investment earning shortfalls in 'valley' years were made up by the government employers." Trustees refer to this practice of taking the "peaks, " also known as, earnings in excess of specified yield rates, as "skimming." As set forth in Trustees' complaint, "When the earnings of high-return years are skimmed, . . . the ERS loses the benefit of high yields that would offset market cycles in low-return years and is denied the benefit of full, ongoing [e]mployer funding."
In 1994, the legislature altered this practice to address the rising level of unfunded ERS obligations. It amended HRS § 88-107 (1993) to require that the excess earnings be applied to the pension accumulation fund 7 in increasing amounts, rather than be credited against employer contributions. 1994 Hawai'i Sess. L. Act 276, § 6 at 863. The legislation provided that, after ten years, one hundred percent of any excess earnings be "allocated and deposited in the pension accumulation fund." Id. Act 276 of the 1994 legislative session added, in part, the following language to HRS § 88-107:
Beginning with actual investment earnings in fiscal year 1995 in excess of the investment yield rate, to address outstanding unfunded pension obligations, ten per cent of such excess earnings shall be deposited in the pension accumulation fund; remaining excess earnings shall be applied to the amounts to be contributed under section 88-123. In each succeeding fiscal year, another ten per cent, cumulatively up to one hundred per cent, of any excess such earnings shall be similarly allocated and deposited in the pension accumulation fund.
Id. (emphases added). The Ways and Means Committee explained that the intent of the Committee was "to liquidate the unfunded benefit obligations by the year 2003 and then begin to use the moneys in the pension accumulation fund to provide benefits exclusively for ERS beneficiaries." Stand. Comm. Rep. No. 2948, in 1994 Senate Journal, at 1171.
For fiscal year 1995, ERS investment yields were significantly below the statutory investment yield rate, and, thus, the ERS faced a shortfall of $99.4 million, which the State and counties were obligated to make up in fiscal year 1997. see Stand. Comm. Rep. No. 486, in 1997 Senate Journal, at 1092. Despite this, the legislature further amended HRS § 88-107 in 1997 and eliminated the obligation of the State and counties to make up any future shortfalls in investment yields. see Stand. Comm. Rep. No. 835, in 1997 Senate Journal, at 1223.
However, Act 327, 1997 Hawai'i Sess. L. Act. 327, § 2 at 774 [hereinafter, Act 327], allowed the ERS to retain one hundred percent of its investment earnings beginning in fiscal year 1997, and accelerated the ten-year time frame within which the ERS would be allowed to retain all of its investment earnings:
Your Committee believes that it is incumbent upon the State to protect the financial integrity of the state retirement program by reducing its $1.6 billion unfunded liability. However, understanding the current fiscal crisis the State faces, your Committee feels it prudent to eliminate the requirement that the state and county governments make up the $99.4 million shortfall from FY 1995. Your Committee
[114 Hawai'i 314] also believes that the ERS must begin to retain all of its investment earnings from FY 1997 in order to begin the systematic liquidation of its unfunded liability.
Stand. Comm. Rep. No. 486, in 1997 Senate Journal, at 1092 (emphasis added). Thus, in 1997 the legislature amended HRS § 88-107 with the addition of the following:
In fiscal year 1996, twenty per cent of the actual investment earnings in excess of the investment yield rate shall be deposited in the pension accumulation fund; remaining excess earnings shall be applied to the amount contributed under section 88-123. 8 Beginning in fiscal year 1997, one hundred per cent of the investment earnings shall be deposited in the pension accumulation fund.
1997 Hawai'i Sess. L. Act 327, § 2 at 774.
But two years after passing Act 327, the legislature enacted Act 100, which amended HRS § 88-107 (Supp. 1998), and retroactively reduced the amounts the State and counties contributed to the ERS in fiscal years 1997 and 1998 by crediting actuarial investment earnings in excess of ten percent of the actuarial investment yield rate toward the State and county contributions. 1999 Hawai'i Sess. L. Act 100, § 1 at 368. Act 100 stated that "[t]he savings realized by the State and the counties . . . shall be utilized for the purpose of funding retroactive cost items for [the Hawai'i Government Employees Association (HGEA)] and [United Public Workers (UPW)] contracts . . . and other necessary items." 1999 Hawai'i Sess. L. Act 100, § 3 at 369. Act 100, amended HRS § 88-107, entitled "Interest, " by deleting the bracketed text and adding the underscored language to read as follows:
(a) The board of trustees shall annually allocate the interest and other earnings of the system to the funds of the system, as follows:
(1) The annuity savings fund shall be credited with the amount of regular interest credited to members' accounts;
(2) The expense fund shall be credited with such sums as provided in section 88-116; and
(3) The remaining investment earnings, if any, shall be credited to the pension accumulation fund.
(b) Beginning with actual investment earnings in fiscal year 1995 in excess of the investment yield rate, to address outstanding unfunded pension obligations, ten per cent of such excess earnings shall be deposited in the pension accumulation fund; remaining excess earnings shall be applied to the amounts to be contributed under section 88-123. In fiscal year 1996, twenty per cent of the actual investment earnings in excess of the investment yield rate shall be deposited in the pension accumulation fund; remaining excess earnings shall be applied to the amount contributed under section 88-123. In fiscal years 1997 and 1998, actuarial investment earnings in excess of a ten per cent actuarial investment yield rate shall be applied to the amount contributed under section 88-123. Beginning in fiscal year [1997,] 1999, one hundred per cent of the investment earnings shall be deposited in the pension accumulation fund.
(c) The application of actuarial investment earnings to the amount contributed under section 88-123 for fiscal years 1997 and 1998 as provided in subsection (b) is a one-time only provision and no law shall be enacted to again require the employees' retirement system to apply actuarial investment earnings to offset the amount contributed under section 88-123.
1999 Hawai'i Sess. L. Act 100, § 1 at 368 (underscoring and brackets in original.) Section 1 of Act 100 took effect retroactive to July 1, 1996. 1999 Hawai'i Sess. L. Act 100, § 9 at 370.
As emphasized supra, instead of permitting the ERS to retain one hundred percent of earnings beginning in 1997, as provided by Act 327 of the 1997 legislative session, Act 100 stated that "actuarial investment earnings in excess of a ten percent investment
[114 Hawai'i 315] yield rate" in fiscal years 1997 and 1998, would be credited against employer contributions required for those years. 1999 Hawai'i Sess. L. Act 100, § 1 at 368. The ERS would not be able to retain one hundred percent of the excess earnings until fiscal year 1999. Id. There were no offsetting benefits to the system overall, such as the State's former guarantee to make up deficits in bad years.
On April 23, 2002, Kaho'ohanohano, Andrade, and SHOPO filed a class action suit on behalf of the members of the ERS against the State alleging that Act 100 diverted $346.9 million from the ERS, in breach of the State's contractual obligations to ERS members, and in violation of article XVI, section 2 of the Hawai'i Constitution. The lawsuit sought declaratory and injunctive relief, and specifically (1) a declaration that Act 100 was unconstitutional and otherwise unlawful; (2) an injunction preventing the State from taking any future actions that would "impair or diminish" the ERS; and (3) monetary damages in the amount of $346.9 million, plus lost earnings thereon.
On July 2, 2002, the State filed a motion to dismiss Plaintiffs' complaint on the grounds that (1) Plaintiffs lacked standing; (2) the action was not ripe for adjudication; (3) the claim for declaratory relief was moot; and (4) the action involved a non-justiciable political question. Intervenor Defendant-Appellee/Cross-Appellant/Cross-Appellee City and County of Honolulu (Honolulu County) and Additional Defendants-Appellees/Cross-Appellees/Cross-Appellants County of Kauai (Kauai County), County of Maui (Maui County), and County of Hawai'i (Hawai'i County) joined the State's motion.
On July 29, 2002, Plaintiffs filed a motion to certify the class they represented, which the court subsequently granted on March 14, 2003.
On August 28, 2002, Honolulu County moved to intervene as a defendant and its motion was subsequently granted by the court.
On October 1, 2002, Plaintiffs filed their First Amended Complaint in order to include two additional class representatives, Efhan and Caravalho.
Also on October 1, 2002, Plaintiffs filed two separate motions for partial summary judgment. The first motion sought a declaratory judgment that Act 100 violated article XVI, section 2, and was therefore unconstitutional. The second motion requested an order declaring that Act 100 breached the contractual rights with respect to the ERS.
On October 8, 2002, Honolulu County filed a motion to join Trustees as a "necessary additional party" and/or in substitution of Plaintiffs as the real party in interest, and sought an order of joinder of Kauai County, Maui County, and Hawai'i County as additional defendants.
On November 15, 2002, Trustees moved to intervene. Also on November 15, the court held a hearing and orally granted Honolulu County's motion as to the joinder of Kauai County, Maui County, and Hawai'i County as additional defendants and Trustees' motion to intervene.
On December 17, 2002, Plaintiffs filed a motion for leave to file a second amended complaint to add breach of contract claims against the counties, which was orally granted on January 10, 2003.
On December 31, 2002, Honolulu County filed a motion to dismiss Plaintiffs as not being the real party in interest. Kauai County, Maui County, and Hawai'i County joined Honolulu County's motion.
On January 7, 2003, an order granting in part and denying in part Honolulu County's October 8, 2002 motion was filed, and Kauai County, Maui County, and Hawai'i County were joined as parties.
On January 10, 2003, the State filed a motion for summary judgment against Plaintiffs and Trustees on the grounds that Plaintiffs' claims against the State were barred by (1) the doctrine of sovereign immunity and (2) the two-year statute of limitations set
[114 Hawai'i 316] forth in HRS § 661-5 (1993); and (3) as a matter of law, Act 100 was constitutional and Plaintiffs cannot establish that the act is contrary to or violative of article XVI, section 2 of the Hawaii Constitution. The State also argued that it was entitled to summary judgment because Plaintiffs were not employees of the State and, therefore, lacked privity of contract with the State.
On January 28, 2003, Trustees filed their complaint against the State challenging the constitutionality of Act 100 and alleging that the act unlawfully diminished and impaired ERS funds, risked the actuarial soundness of the ERS, denied the ERS members protection of the funds, and interfered with the discretion of Trustees in the investment and reinvestment of ERS funds.
On February 27, 2003, the court held a hearing on the State's July 2, 2002 motion to dismiss, and Honolulu County's December 31, 2002 motion to dismiss. With respect to the State's motion, the court stated:
I think the question before the court is the question of standing. And I think earlier the court in this proceeding the [c]ourt articulated its scope of inquiry to be whether or not [P]laintiffs do, in fact, have certain rights with regard to the sound actuarial condition of the [ERS]. I think as a result of the discussion, the court has come to the realization that that determination is probably best left to another day.
At this time, what the [c]ourt needs to adjudicate is whether the individual named [P]laintiffs have a sufficient interest in the outcome so as to justify their prosecution of the claims in this case. We will get into it a little bit with regard to [Honolulu County's] motion, but the mere fact that monies at this time, in this action, may not actually be paid to the [P]laintiffs doesn't end this court's inquiry because there are equitable relief that is also prayed for by the individual named [P]laintiffs.
At this time, there were references by both the [S]tate and the [P]laintiffs to submissions contained in the -- in connection with the motion for summary judgment, and I think this court at least would be more comfortable availing itself of that more complete record to adjudicate whether or not the individual named [P]laintiffs have a specific right or interest in the surplus accounts or excess earning accounts. So the court at this time concludes that the [P]laintiffs do have a sufficient interest in the outcome to justify this matter going forward on their behalf, so the [c]ourt will respectfully deny the [S]tate's motion to dismiss, certainly without prejudice to raising at the time of the motions for summary judgment any and all arguments raised at this proceeding.
(Emphases added.) " The [c]ourt [elected] under [Hawai'i Rules of Civil Procedure (HRCP)] Rule 52 not to make any specific findings of fact or conclusions of law." It stated that "[a] simple order denying the motion for good cause is -- will be sufficient."
The court further ruled:
Turning to [Honolulu County's] motion, which is the motion regarding real party in interest. I think the [c]ourt's alluded to its inclination that simply because damages may not be paid to the individuals named, that is not dispositive of their ability to prosecute this case in their own names and as representatives of a larger class. So the [c]ourt is inclined to deny that motion and all joinders.
On March 17 and 18, 2003, the court held a hearing on the State's January 10, 2003 motion for summary judgment and Plaintiffs' two separate October 1, 2002 motions for partial summary judgment. At the end of the hearing, the court granted the State's motion for summary judgment against Plaintiffs and Trustees, and denied Plaintiffs' motions for partial summary judgment. The court stated that it did not agree with the sovereign immunity argument and "[P]laintiffs could sue and bring this action if in fact Act 100 were unconstitutional." The court also dismissed the statute of limitations argument.
The court instead found that there had been an "insufficient showing that the Constitutional
[114 Hawai'i 317] Convention of 1950 intended to restrict the State's power and flexibility to enact future legislation as long as it did not diminish or impair the accrued benefits" and that "the phrase accrued benefits does not include the right of the members to an actuarially sound retirement system." Thus, the court concluded that Act 100 was constitutional as a matter of law. Specifically, the court determined that "it was incumbent upon this court to construe the language of [a]rticle XVI, section 2 to determine whether in fact the [P]laintiffs have a right."
According to the court, it "elect[ed] pursuant to [HRCP] Rule 52 not to make any specific findings of fact and conclusions of law but simply [to issue] an order disposing of the motion which would incorporate any good cause shown in the record to sustain the [c]ourt's ruling." In discussing the remaining claims, the court stated, "I still like my idea of a dismissal without prejudice that could be reinstated in the event of a remand. It's cleanest. It doesn't prejudice anyone. I hope to still be the judge here if the matter comes back down."
On May 16, 2003, the court entered its written "Order Denying [the State's] Motion to Dismiss and [Honolulu County's] Motion to Dismiss the Individual Plaintiffs." The order states in relevant part:
For good cause, IT IS HEREBY ORDERED that [the State's] Motion to Dismiss filed June 28, 2002, and all joinders therewith, are DENIED without prejudice.
For good cause, IT IS HEREBY ORDERED that [Honolulu County's] Motion to Dismiss the Individual Plaintiffs, filed December 31, 2002, and all joinders therewith, are DENIED without prejudice.
The court's June 24, 2003 written judgment confirmed that the State's motion for summary judgment against Plaintiffs and Trustees was granted, and that Plaintiffs' motions for partial summary judgment based on article XVI, section 2, and for breach of contract, were denied. The judgment further specified, "[A]ll other claims in this action (including, without limitation, the claims in [P]laintiffs' second Amended Complaint against [Honolulu County, Kauai County, Maui County, and Hawaii County]) were dismissed without prejudice, sua sponte."
On June 27, 2003, Honolulu County filed a motion to alter or amend the order granting the State's motion for summary judgment and denying Plaintiffs' motions for partial summary judgment, and the June 24, 2003 judgment in favor of the State on the basis that Honolulu County was entitled to a judgment in its favor. The other three counties joined in the motion. No order disposing of the motion was entered on the record within ninety days after the motion was filed. Thus, for purposes of HRAP 4(a)(3), the motion was deemed denied on September 25, 2003, ninety days after the filing of the June 27, 2003 motion.
On October 24, 2003, Plaintiffs and Trustees filed notices of appeal from the June 24, 2003 final judgment.
On November 6, 2003 and November 7, 2003, Hawai'i County, Honolulu County, Maui County, and Kauai County [collectively, the Counties] filed cross-appeals from the June 24, 2003 final judgment in favor of the State and against Plaintiffs and Trustees, and from the denial of (1) Honolulu County's June 27, 2003 motion to alter or amend, and (2) Hawai'i County's, Maui County's, and Kauai County's joinder to Honolulu County's June 27, 2003 motion to alter or amend. 9
On November 7, 2003, the State filed a cross-appeal from the court's May 16, 2003 order denying the State's motion to dismiss.
Initially, the State argues on appeal that (1) Trustees "lack standing to bring their complaint in intervention"; (2) "Plaintiffs lack standing to bring this lawsuit"; (3) Plaintiffs' "action is not ripe for adjudication";
[114 Hawai'i 318] (4) Trustees' and Plaintiffs' claims for declaratory relief are moot; (5) "this lawsuit involves 'political questions' and is not justiciable"; (6) "Trustees' action against the State is barred by the doctrine of sovereign immunity"; and (7) "Trustees' action against the State is barred by the 2-year statute of limitations set forth in HRS § 661-5." We consider, first, the question of Plaintiffs' standing.
As to the issue of standing, generally it has been declared by this court that " standing is concerned with whether the parties have the right to bring suit." Pele Def. Fund v. Puna Geothermal Venture, 77 Hawai'i 64, 67, 881 P.2d 1210, 1213 (1994) (internal quotation marks and citation omitted). " '[T]he crucial inquiry with regard to standing is whether the plaintiff has alleged such a personal stake in the outcome of the controversy as to warrant his or her invocation of the court's jurisdiction and to justify exercise of the court's remedial powers on his or her behalf.' " Mottl v. Miyahira, 95 Hawai'i 381, 389, 23 P.3d 716, 724 (2001) (quoting In re Matson Navigation Co. v. Fed. Deposit Ins. Corp., 81 Hawai'i 270, 275, 916 P.2d 680, 685 (1996)) (emphasis added). In determining whether a plaintiff has standing, the court "look[s] solely to whether [the plaintiff] is the proper plaintiff . . ., without regard to the merits of the allegations." Hawaii's Thousand Friends v. Anderson, 70 Hawai'i 276, 281, 768 P.2d 1293, 1298 (1989).
In addition, in analyzing whether a party has standing, "[o]ur touchstone remains the needs of justice." Life of the Land v. Land Use Comm'n, 63 Hawai'i 166, 176, 623 P.2d 431, 441 (1981) (internal quotation marks and citation omitted). Hence, "while every challenge to governmental action has not been sanctioned, our basic position has been that standing requirements should not be barriers to justice." Id. at 173-74, 623 P.2d at 439. Thus, "[o]ne whose legitimate interest is in fact injured by illegal action of an agency or officer should have standing because justice requires that such a party should have a chance to show that the action that hurts his interest is illegal." Id. at 174 n.8, 623 P.2d at 439 n.8 (internal quotation marks and citations omitted) (emphasis added). Moreover, "[a]t the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice." Sierra Club v. Hawaii Tourism Auth., 100 Hawai'i 242, 250-51, 59 P.3d 877, 885-86 (2002) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (other citations omitted)) (brackets omitted). Additionally, " an organization . . . has standing to sue for injury to its own interests, separate from any injury to its members, inasmuch as standing may be established in an individual or representative capacity." Hawaii Med. Ass'n v. Hawaii Med. Serv. Ass'n, 113 Hawai'i 77, 100-01, 148 P.3d 1179, 1202-03 (2006) (citing Havens Realty Corp. v. Coleman, 455 U.S. 363, 378-79, 102 S.Ct. 1114, 71 L.Ed.2d 214 (1982)).
Thus, "[i]n deciding whether the plaintiff has the requisite interest in the outcome of the litigation, we employ a three-part test: (1) has the plaintiff suffered an actual or threatened injury as a result of the defendant's wrongful conduct; (2) is the injury fairly traceable to the defendant's actions; and (3) would a favorable decision likely provide relief for plaintiff's injury." Akinaka v. Disciplinary Bd. of the Hawai'i Supreme Court, 91 Hawai'i 51, 55, 979 P.2d 1077, 1081 (1999) (citing Bush v. Watson, 81 Hawai'i 474, 479, 918 P.2d 1130, 1135 (1996)). Furthermore, "[w]ith respect to the first prong of this test, the plaintiff must show a distinct and palpable injury to himself or herself. The injury must be distinct and palpable, as opposed to abstract, conjectural, or merely hypothetical." Id. (internal quotation marks, brackets, and citations omitted) (emphasis added). Because "the test is stated in the conjunctive, [a plaintiff] must satisfy all three prongs to establish its standing." Sierra Club, 100 Hawai'i at 250, 59 P.3d at 885.
As to the State's argument (2), the parties appear to agree that the central issue as to Plaintiffs'standing is the first prong of the
[114 Hawai'i 319] Akinaka test, namely, "has the plaintiff suffered an actual or threatened injury as a result of the defendant's wrongful conduct[.]" 91 Hawai'i at 55, 979 P.2d at 1081 (citation omitted) (emphasis added). In its Opening Brief, the State argues that each individual Plaintiff lacks standing.
First, the State argues that Kaho'ohanohano, who although retired, "has not alleged or shown that his 'retirement allowance' or 'accrued benefits' ha[ve] actually been impaired or diminished by Act 100." Specifically, the State maintains that Kaho'ohanohano "admitted that (1) he was paid his retirement allowance under Chapter 88 of the [HRS] and (2) the ERS has not stopped paying him his retirement allowance because of Act 100."
Second, the State similarly contends that Andrade and Efhan have "not alleged or shown that their 'accrued benefits' or 'retirement allowance' was actually impaired or diminished by Act 100." The State argues that Efhan "admitted that (1) she has not retired as an employee of the State or any of the counties; (2) she is a Class C member 10 and (3) she is not entitled to receive payment of any retirement allowance under Chapter 88 of the [HRS]." The State does not provide any specific argument as to Andrade.
Next, the State argues that Caravalho, "who has been a [State] employee since March of 1998 . . . [,] was not even eligible to receive a retirement allowance since she does not have 10 years of credited service and has not attained the age of 62 or [obtained] 30 years of credited service and [reached] the age of 55." 11 The State indicates that Caravalho admitted that "(1) she has not retired as an employee of the [State] or any of the counties; (2) she is a Class C member; (3) she does not have 20 years of credited service under [HRS §] 88-272 [(1993)]; and (4) she is not entitled to receive payment of any retirement allowance under Chapter 88 of the [HRS]." Thus, the State maintains that Caravalho "has not alleged or shown that her 'accrued benefits' or 'retirement allowance' was actually diminished or impaired by Act 100."
Finally, the State claims that "SHOPO has not alleged or shown that any of its members' 'accrued benefits' or 'retirement allowance' was actually diminished or impaired by Act 100." The State asserts that "SHOPO admitted (1) under Chapter 89 of the [HRS], it was not the representative of any employee of the [State]; (2) its members were employed by the counties; and (3) it has no knowledge as to whether or not any state or county retiree has been denied his or her retirement allowance as a result of Act 100."
Plaintiffs respond that (1) they have "standing to sue because [they] allege[d a] threatened injury to concrete interests"; (2) "controlling New York law confers standing"; (3) "other state courts recognize members standing"; and (4) "the State's legal authority is inapt."
In regard to Plaintiffs' argument (1), Plaintiffs note that the "State's argument focuses on only the first element of the 'injury in fact' test" and that "the State's argument reads the phrase 'threatened injury' out of Hawaii's standing analysis." Plaintiffs question that "if the framers of the Hawai'i Constitution meant to protect only the amount of the benefits check, why would they have
[114 Hawai'i 320] expressly protected 'accrued benefits' from both diminishment and impairment?"
According to Plaintiffs, "[p]rotection only from diminishment would have given the ERS members all the protection the State here argues they have standing to assert. For the [Hawai'i] Constitution's protection against 'impairment' to be given effect, impairment must be seen as what it is, an actual injury realized today." Plaintiffs further assert that "even under the most stringent construction against them, the [Hawai'i] Constitution's use of the word 'impair' must contemplate the sort of 'threatened injury' that Hawaii's standing doctrine also encompasses."
The State cites Mottl for its assertion that Plaintiffs suffered no "actual or threatened injury" in the instant case. In Mottl, the University of Hawai'i Professional Assembly and faculty members, some of whom were also state legislators, brought an action against the governor and the State Director of Finance challenging their decision to reduce the University of Hawaii's allotment of funds appropriated for a specific fiscal year. 95 Hawai'i at 385, 23 P.3d at 720. The plaintiffs sought "declaratory and injunctive relief . . . to prevent the implementation of the 'payroll lag act.' " Id. at 383, 23 P.3d at 718 (citation omitted). They alleged that "the withholding of six million dollars from the University of Hawaii's appropriation resulted in 'a loss of support for working conditions, teaching programs, research programs, discretionary support staff, replacement of consumable items, and . . . electricity and telephone charges[.]' " Id. at 394, 23 P.3d at 729 (ellipses in original).
However, despite the aforementioned argument, this court held that the individual plaintiffs lacked standing to pursue the lawsuit because they were unable to show a "specific and personal injury" under the Akinaka test and only alleged an injury that was "abstract, conjectural, or merely hypothetical."
The plaintiffs do not attempt to prove any specific and personal injury but, rather, press their general proposition that, in any organization, a loss of six million dollars from its budget must have some negative effect on its operations, ultimately affecting all of its employees. Their argument calls for assumptions or inferences that are not supported by the record or any case law that the plaintiffs cite. Accordingly, the injury that the plaintiffs assert is "abstract, conjectural, or merely hypothetical." Akinaka, 91 Hawai'i at 55, 979 P.2d at 1081. Citizens for Protection of North Kohala Coastline [v. County of Hawai'i], 91 Hawai'i [94,] 100, 979 P.2d [1120,] 1126 [(1999)], does not abrogate the "injury in fact" standing requirement in actions for declaratory relief affecting a public interest, but merely mandates less demanding standards in assessing the plaintiffs' proof of an "injury in fact." Inasmuch as the plaintiffs have failed to demonstrate that they suffered an injury to a recognized interest, as opposed to merely airing a political or intellectual grievance, Akau [v. Olohana Corp., 65 Hawai'i [383,] 390, 652 P.2d [1130,] 1135 ([1982)], we hold that the plaintiffs lacked standing to pursue the present action.
Id. at 395, 23 P.3d at 730 (some emphasis in original and some added). The State notes that with respect to a threatened injury that has not yet occurred, a plaintiff must allege that he or she is "immediately in danger of sustaining some direct injury" and the injury "must be both real and immediate[.]" O'Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974) (internal quotation marks and citations omitted).
Like the plaintiffs in Mottl, it appears that Plaintiffs here have failed to allege a "an actual or threatened injury" sufficient to meet the first prong of the Akinaka test. see Mottl, 95 Hawai'i at 395, 23 P.3d at 730. No individual plaintiff has been able to show how he or she has suffered an actual or threatened "distinct and palpable injury[,]" Akinaka, 91 Hawai'i at 55, 979 P.2d at 1081 (internal quotation marks and citation omitted), to him or herself or how they have personally " suffered an injury to a recognized
[114 Hawai'i 321] interest[,]" Mottl, 95 Hawai'i at 395, 23 P.3d at 730 (citation omitted).
Similar to the Mottl plaintiffs' argument that "a loss of six million dollars from its budget must have some negative effect on its operations, ultimately affecting all of its employees[,]" Id. (emphasis in original), Plaintiffs here attempt to show that impairing the system by removing funds will ultimately effect all members of the ERS. However, as this court said in Mottl, that contention is "abstract, conjectural, or merely hypothetical" with respect to each individual plaintiff. Id. (internal quotation marks and citations omitted).
The State also cites to Retirement Board of the Employees Retirement System of Providence v. Cianci, 722 A.2d 1196 (R.I. 1999), for the proposition that Plaintiffs have "not alleged or shown a 'distinct and palpable injury' " to themselves "involving a legally protected interest." In Cianci, the plaintiffs included a retired employee and a current employee who brought suit because the city failed to fund the retirement system with the amount initially recommended by the official actuary by the city. Id. at 1197. The plaintiffs sought declaratory relief and a judgment for mandamus ordering the city to make payments to the retirement fund in an amount sufficient to meet the actuarial recommendations. Id. The Cianci court determined that the two employees lacked standing to bring the suit because they were unable to show an "injury in fact." Id. at 1198.
[T]he employees have not shown an injury in fact since neither has alleged nor can allege that he or she has not received any pension benefit to which he or she is entitled. The retired employee has received retirement benefits as they become due and the non-retired employee is not yet eligible to receive such benefits. [Further] there is no immediate threat that the pension fund will become insolvent, and that there has been no showing that the deferment of the [cost of living adjustment] shortfall will jeopardize any person's particular pension benefits at any particular time.
Id. (emphasis added).
Although Plaintiffs attempt to distinguish Cianci by stating that "the Rhode Island court failed to recognize that a 'threatened injury' to a concrete interest is just as sufficient to convey standing as an injury that has already occurred[,]" as emphasized above, the Rhode Island court found that there was "no immediate threat that the pension fund [would] become insolvent." Id. Thus, Cianci did analyze whether the plaintiffs suffered a threatened injury by failing to fund the system.
Cianci is instructive. Like the Cianci plaintiffs, Plaintiffs are retired and current employees challenging the State's failure to fund the retirement system but areunable to show that they have "not received any pension benefit to which he or she is entitled[,]" nor have they been able to show any "immediate threat that the pension fund will become insolvent[.]" Id. Thus, Cianci supports the conclusion that Plaintiffs here lack standing.
Plaintiffs note that "[t]his court recently confirmed that a plaintiff need not 'wait until its concrete interests were injured' before bringing suit; the plaintiff need only show that it has concrete interests that will be injured if the threat materializes." (Citing Sierra Club, 100 Hawai'i at 252 n.16, 59 P.3d at 887 n.16.). But as the State notes, Kaho'ohanohano is retired and his retirement allowance under Chapter 88 has not been reduced or stopped as a result of Act 100. Although he does not have to wait "until [his] concrete interests were injured[,]" Kaho'ohanohano has not shown he faces a "threatened injury as a result of [the State's] conduct." Sierra Club, 100 Hawai'i at 252 n.16, 59 P.3d at 887 n.16 (internal quotation marks, emphasis, brackets, and citation omitted). He has not alleged that his benefits are likely to be reduced, delayed, or stopped as a result of Act 100.
As to those plaintiffs that are currently employed, obviously, because they are
[114 Hawai'i 322] not retired, they are not yet receiving retirement benefits. Efhan admitted that she was not yet eligible to receive such benefits. The same is true of Caravalho, who has also not yet obtained the ten years of credited service required under HRS § 88-272. 12 Thus, their claims are further removed than those of Kaho'ohanohano and they have made no showing that their retirement benefits are likely to be reduced, delayed, or stopped as a result of Act 100. Finally, as to SHOPO, the labor organization representing police officers whose members are employed by the counties of Honolulu, Kauai, Maui, or Hawai'i, it admitted that it has "no knowledge as to whether any [S]tate or county employee had been denied his or her retirement allowance as a result of Act 100." SHOPO does not allege that any of its members have not received their retirement benefits or are currently in danger of not receiving them. Thus, SHOPO has been unable to show an "actual or threatened injury" to itself or its members that is "distinct and palpable[.]" Akinaka, 91 Hawai'i at 55, 979 P.2d at 1081 (internal quotation marks and citation omitted).
Plaintiffs rely on the testimony of their actuarial expert as evidence of an injury to all Plaintiffs. However, Plaintiffs' expert, Mark Johnson (Johnson), although fully explaining how the diversion of $346.9 million impaired the retirement system itself, does not show how each individual Plaintiff faces an "actual or threatened injury."
Plaintiffs argue that diminishing ERS assets "postponed the day when employee contributions could be decreased or suspended; increased the risk of nonpayment, partial payment, or delayed payment of benefits; and made it more likely that there would be further deferrals or diversions of employer contributions in the future[.]" Johnson stated that, "[b]y diverting $346.9 million from the ERS, the legislature lessened the possibility of members receiving benefit enhancements in the future." He further explained that some examples of "benefit enhancements" from other states include the provision of additional benefits after 30 years of service, credit in pension formula for unused sick leave, increased minimum benefit for current retirees, and automatic cost of living increases. Because Plaintiffs have not put forth any evidence they would have received, or were entitled to, these benefits, the alleged injury is speculative.
Johnson further recounted that in some other states, where a retirement system is "fully funded, " the retirement system suspends employee and employer contributions. Thus he argued that "the diversion of $346.9 million from the ERS postpones the day when employee contributions could be decreased or suspended." However, like enhanced benefits, there is no evidence presented of when and if the ERS would become fully funded and suspend employee contributions. To conclude that Plaintiffs face a threatened injury because "Act 100 postpones the day" when their contributions "could be decreased or suspended" does not rise to the level of an "actual or threatened" injury. Akinaka, 91 Hawai'i at 55, 979 P.2d at 1081 (citation omitted).
[114 Hawai'i 323] Finally, Johnson stated that "[t]he diversion of $346.9 million from the ERS increased the system's unfunded liability"; thus, he contended that "Act 100 and other history involving the State's funding of the ERS mark a disturbing trend that could lead, in the not unforeseeable future, to a delay or reduction in the payment of pension checks to some or all of the members." Once again, while this trend is disturbing, a prediction that Act 100 "could lead, in the not unforeseeable future, to a delay or reduction" in retirement payments is not sufficient to rise to the level of a threatened injury as to an individual Plaintiff on this record.
In connection with their first argument, regarding the plain language of article XVI, section 2, while both "diminishment" and "impairment" describe different adverse consequences, Plaintiffs have nonetheless been unable to show sufficient, distinct, and personal injury here. As was explained previously, this court cannot ascribe standing simply because "we are cognizant of the concerns raised by [Plaintiffs.]" Sierra Club, 100 Hawai'i at 250, 59 P.3d at 885. Plaintiffs must be able to show that they have "suffered an actual or threatened injury as a result of [the State's] conduct[,]" and for the foregoing reasons, that has not been demonstrated here.
In regard to Plaintiffs' argument (2), Plaintiffs argue that "[t]he law explicitly provides that membership in the ERS commences as of the date of hire, [HRS § 88-42,] . . . [a]rticle XVI, section 2 provides that membership in the system is a 'contractual relationship[,]' "and "[s]tanding to enforce the 'contractual relationship' recognized by the [Hawai'i] Constitution was decided under New York law before Hawai'i statehood." (Citing Birnbaum v. New York State Teachers' Ret. Sys., 5 N.Y.2d 1, 176 N.Y.S.2d 984, 152 N.E.2d 241 (1958).).
In Birnbaum, the plaintiffs brought an action for a declaratory judgment "on behalf of themselves and all other school teachers in the State of New York similarly situated." Id. at 243. The plaintiffs challenged the validity of adopting a particular actuarial table for computing the annuity benefits of the members. Id. They argued that the new table constituted "a breach of the contractual relationship established by [the New York constitutional pension provision] as to members of the retirement system[.]" Id. New York's highest court rejected the defendants' argument that the plaintiffs did not have standing.
Neither of the plaintiffs has resigned or applied for retirement. Also recognized, is the possibility as urged by the defendant, that one or both of the plaintiffs may cease their employment as teachers in the public school prior to attaining retirement status, in which event they could withdraw their accumulated contributions to the pension system and the mortality tables in effect would have no bearing. However, the security offered by membership in the retirement system is generally regarded as an inducement to employment in state service or in the public schools. The value of retirement benefits and prospective rate of payment, especially in the face of continued inflation, is of vital concern to the plaintiffs and might well be the determining factor in their decision to continue in the teaching profession or seek more lucrative employment.
Id. (emphasis added). Birnbaum further stated that "[b]y the constitutional amendment the people determined to confer contractual protections upon the benefits of pension and retirement systems of the State and of the civil divisions thereof, and to prohibit their diminution or impairment prior to retirement." Id. at 987-88, 152 N.E.2d at 244-45.
Assuming, arguendo, that Birnbaum supports conferring standing on Plaintiffs because of the "contractual relationship" clause in our own pension provision, we need not accept Birnbaum as persuasive in this case because we employ our own "injury in fact test" in determining standing. The Birnbaum court's standing analysis appears to be limited to affirming the lower court's conclusion that the pension system served as an inducement to employment and did not include
[114 Hawai'i 324] an analysis that in any way resembled the Akinaka test that we employ. See supra.
In regard to Plaintiffs' argument (3), Plaintiffs focus on Dombrowski v. City of Philadelphia, 431 Pa. 199, 245 A.2d 238 (1968). They argue that in that case, where a city employee, who would not be eligible for retirement for another six years, sued to compel the city to make necessary appropriations to the retirement system, the Supreme Court of Pennsylvania determined that the employee's "vested right to his retirement benefits, and his contractual relationship to the city and its retirement system are interests he does not share with the general public and which he holds independent of the public." 13 Id. at 244.
Dombrowski involved an "action in mandamus." The mandamus statute in that case stated that a writ "shall issue on the application of any person beneficially interested." Id. at 242 (emphasis added). The case law interpreting that statute declared that "the relevant [standing] inquiry [was] whether the private plaintiff possesses an interest which is not shared by the public at large." Id. Thus the standing standard did not resemble the Akinaka test and did not require any showing of injury but only that the person be "beneficially interested" or possess "an interest which is not shared by the public at large." Id. Thus, Dombrowski is not persuasive in an analysis of Plaintiffs' standing.
Doubtless, Plaintiffs performed a service for the retirement system and future retirees by filing a suit that the Trustees may have been obligated to bring in the first place. However, as indicated herein, Plaintffs lack legal standing to bring the suit. For the foregoing reasons, Plaintiffs do not meet the "actual or threatened injury" requirement to show standing in this case. Thus, analysis of the other two prongs of the Akinaka test are not necessary. Plaintiffs do not provide any argument that would indicate that the second and third prongs of the Akinaka test have been satisfied.
As to the Trustees' standing and State's argument (1), it should be noted that this issue is raised for the first time by the State on appeal, and was thus not addressed by the court. Nonetheless, "[b]ecause standing is a jurisdictional issue that may be addressed at any stage of a case, an appellate court has jurisdiction to resolve questions regarding standing, even if that determination ultimately precludes jurisdiction over the merits." Keahole Def. Coal., Inc. v. Bd. of Land & Natural Res., 110 Hawai'i 419, 427-28, 134 P.3d 585, 593-94 (2006) (citing United Pub. Workers, Local 646 v. Brown, 80 Hawai'i 376, 379, 910 P.2d 147, 150 (App. 1996)).
As to the first prong of the three-part Akinaka test, Akinaka, 91 Hawai'i at 55, 979 P.2d at 1081, it is preliminarily observed that, to reiterate, the ERS has "the powers and privileges of a corporation[.]" HRS § 88-22. The ERS "may sue or be sued, transact all of its business, invest all of its funds, and hold all of its cash and securities and other property" in its own name. Id. Trustees are charged with "[t]he general administration
[114 Hawai'i 325] and the responsibility for the proper operation of the retirement system and for making effective the provisions of this part and part VII 14 of this chapter[.]" HRS § 88-23. In that regard, "[i]t is axiomatic that a corporation's directors and officers assume fiduciary duties." Honda II, 108 Hawai'i at 343, 120 P.3d at 242 (citations omitted).
As recounted previously, the ERS funds are funded through employee and employer contributions, and investment earnings. In this respect, Trustees "shall be trustees of the several funds of the system and may invest and reinvest such funds as authorized by this part and by law from time to time provided." HRS § 88-110 (1993); see Honda II, 108 Hawai'i at 344, 120 P.3d at 243.
Furthermore, "any and all sums contributed or paid from whatever source to the system for the funds created by this part, and all funds of the system including any and all interest and earnings of the same, are and shall be held in trust by [Trustees] for the exclusive use and benefit of the system and for the members of the system and shall not be subject to appropriation for any other purpose whatsoever." HRS § 88-127; see Honda II, 108 Hawai'i at 344, 120 P.3d at 243. Hence, "Trustees, by definition, are imbued with fiduciary duties." Honda II, 108 Hawai'i at 343, 120 P.3d at 242 (citations omitted) As we have stated, "[Trustees] owe a 'trust' duty to not just the 'system' as a whole . . . but to 'members of the system' as well." Id. at 344, 120 P.3d at 243 (emphasis in original).
Hence, "[i]t is within the power, and is the duty, of a trustee to institute action and proceedings for the protection of the trust estate and the enforcement of claims and rights belonging thereto, and to take all legal steps which may be reasonably necessary with relation to those objectives[,]" Brisnehan v. Cent. Bank & Trust Co., 134 Colo. 47, 299 P.2d 113, 115 (1956) (citation omitted). Moreover, "[it] is always the duty of a trustee to protect the trust property, and for that purpose institute actions, intervene in actions pending, and, in any other way, in accordance with orderly procedure, protect such property." Brenizer v. Supreme Council, Royal Arcanum, 141 N.C. 409, 53 S.E. 835, 838 (1906) (emphasis added). Thus, charged with general administration and responsibility for the proper operation of the retirement system, and the protection of the res, Trustees have a legal duty to protect the pension accumulation fund from diminishment and impairment, for the viability of the retirement system itself.
On the face of their complaint, 15 it appears that Trustees have sufficiently alleged
[Entire Page Contains Footnote]
[114 Hawai'i 327] "an actual or threatened injury as a result of the [State's alleged] wrongful conduct." see Akinaka, 91 Hawai'i at 55, 979 P.2d at 1081 (citation omitted).
First, as Trustees allege in paragraph 20 of the complaint, " when earnings of high-return years are skimmed, however, the ERS loses the benefit of high yields that would offset market cycles in low-return years and is denied the benefit of full, ongoing [e]mployer funding." Such an allegation, if taken as true, sufficiently establishes an injury-in-fact for purposes of standing, in that the ability of the ERS to offset "low-return years" both in the past and in the future is adversely altered. Because "[f]ull ongoing [e]mployer funding . . . is needed to assure stability and operation of the ERS on an actuarially sound basis, " as Trustees state in paragraph 41 and reiterate in paragraph 42, it would be legally imperative for Trustees to bring suit and to question the validity of any statute which negatively impaired the ERS' continued stability and operation.
Second, Trustees alleged that they had a reasonable expectation of retaining all investment earnings...
To continue readingFREE SIGN UP