952 P.2d 1215 (Hawai'i 1998), 19699, Chun v. Board of Trustees of Employees' Retirement System of State of Hawaii

Docket Nº:19699, 19735.
Citation:952 P.2d 1215, 87 Hawai'i 152
Opinion Judge:[12] Levinson
Party Name:Michael A.S. CHUN, Gladys Farm, Herbert T. Imanaka, Jimmy T. Izu, Samuel Y. Kakazu, Billy G. Southwood, Eishin Tengan and Thomas Y. Yano, Appellants-Appellees/Cross-Appellants, v. BOARD OF TRUSTEES OF THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII, Appellee-Appellant/Cross-Appellee, and Employees' Retirement System of the State of Hawaii,
Attorney:[7] On the briefs: [8] Charles K.Y. Khim for appellants-appellees/cross-appellants Michael A.S. Chun, Gladys Farm, Herbert T. Imanaka, Jimmy T. Izu, Samuel Y. Kakazu, Billy G. Southwood, Eishin Tengan, Thomas Y. Yano, Valerie Yamada Southwood, and Barbara Jane Luke [9] Russell A. Suzuki, Diane Er...
Case Date:March 25, 1998
Court:Supreme Court of Hawai'i
 
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Page 1215

952 P.2d 1215 (Hawai'i 1998)

87 Hawai'i 152

Michael A.S. CHUN, Gladys Farm, Herbert T. Imanaka, Jimmy T. Izu, Samuel Y. Kakazu, Billy G. Southwood, Eishin Tengan and Thomas Y. Yano, Appellants-Appellees/Cross-Appellants,

v.

BOARD OF TRUSTEES OF THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII, Appellee-Appellant/Cross-Appellee,

and

Employees' Retirement System of the State of Hawaii, Appellee-Appellee/Cross-Appellee.

Valerie Yamada SOUTHWOOD and Barbara Jane Luke, Appellants-Appellees/Cross-Appellants,

v.

BOARD OF TRUSTEES OF THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAII, Appellee-Appellant/Cross-Appellee,

and

Employees' Retirement System of the State of Hawaii, Appellee-Appellee/Cross-Appellee.

Nos. 19699, 19735.

Supreme Court of Hawai'i.

March 25, 1998

Page 1216

[Copyrighted Material Omitted]

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[87 Hawai'i 154] Charles K.Y. Khim, on the briefs, Honolulu, for appellants-appellees/cross-appellants

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[87 Hawai'i 155] Michael A.S. Chun, Gladys Farm, Herbert T. Imanaka, Jimmy T. Izu, Samuel Y. Kakazu, Billy G. Southwood, Eishin Tengan, Thomas Y. Yano, Valerie Yamada Southwood, and Barbara Jane Luke.

Russell A. Suzuki, Diane Erickson, Katherine C. Desmarais, and Girard D. Lau, Deputy Attorneys General, on the briefs, for appellee-appellant/cross-appellee Board of Trustees of the Employees' Retirement System of the State of Hawai'i.

Mark J. Bennett, McCorriston Miho Miller Mukai, on the briefs, Honolulu, for appellee-appellee/cross-appellee Employees' Retirement System of the State of Hawai'i.

Before MOON, C.J., and LEVINSON, NAKAYAMA and RAMIL, JJ., and Circuit Court Judge HUDDY, in place of KLEIN, J., Recused.

LEVINSON, Justice.

The appellee-appellant/cross-appellee Board of Trustees of the Employees' Retirement System of the State of Hawai'i (the Board) and the appellee-appellee/cross-appellee Employees' Retirement System of the State of Hawai'i (the ERS) appeal, and the appellants-appellees/cross-appellants Michael A.S. Chun, Gladys Farm, Herbert T. Imanaka, Jimmy T. Izu, Samuel Y. Kakazu, Billy G. Southwood, Eishin Tengan, Thomas Y. Yano, Valerie Yamada Southwood, and Barbara Jane Luke (collectively, the Retirees)--who, as retired public school principals, vice principals, or teachers are members of the ERS--cross-appeal from the circuit court's (1) "final order," filed on March 4, 1996, reversing the Board's decision and order entered on March 23, 1995 and (2) final judgment entered on March 11, 1996.

On appeal, the Board and ERS assert that the circuit court erred in: (1) failing to defer to the Board's interpretation of the relevant statutes; (2) incorrectly construing Hawai'i Revised Statutes (HRS) §§ 79-1 (1993), 1 88-81 (1993 & SUPP. 1997), 2 AND 297-38 (1993); 3 [87 Hawai'i 156]

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(3) ruling that, in the calculation of their pension benefits, the Retirees are entitled to the same treatment as legislators, who are deemed to be full-year employees notwithstanding that their official duties are not uniformly distributed throughout the entire calendar year; (4) setting aside the Board's factual finding, on the basis that the reasons therefore were not ascertained, that the Department of Education (DOE) treats the summer months as paid vacation time; (5) ruling that the Retirees' substantial rights were prejudiced by the inaccurate calculation of their pension benefits; and (6) including similarly situated persons, who retired subsequent to the filing of the Retirees' class action lawsuit, in the certified classes.

On cross-appeal, the Retirees contend that the circuit court erred in sustaining the Board's denial of the Retirees' motions: (1) to disqualify two trustees of the ERS--Kenneth Matsuura and Annette Hee--from participation in the Board's hearing of the Retirees' appeal on the grounds of actual bias; (2) to disqualify attorney Mark Bennett from representing the ERS at a hearing conducted before the Board on the grounds that (a) he had represented the Board itself only two months prior to the hearing and, therefore, (b) he was subject to a conflict of interest; and (3) to postpone the Board's hearing of the Retirees' appeal until (a) the recently established seat of a "retirant" member of the Board had been filled 4 and (b) the Board

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[87 Hawai'i 157] appointed an "administrator," in accordance with the provisions of HRS § 88-29 (1993), as amended by Act 39 of the 1992 Hawai'i Session Laws. 5

Because we hold--in the absence of the express authorization of the Board, conferred by an official majority vote of its members--that the ERS (at the behest of its purported "administrator") and "the Board" (at the behest of the Attorney General) lacked the power to appeal the circuit court's final order and judgment, we decline to address the merits of their points of error and dismiss their unauthorized appeals. The Retirees' cross-appeal thus being rendered moot, we need not reach the points of error raised therein.

  1. BACKGROUND

    Prior to retiring, the Retirees (as public school principals, vice principals, or teachers) were all "ten-month employees" of the DOE, who worked primarily during the school year but received their salaries in equal periodic installments throughout the calendar year. The present appeal arises out of two class action lawsuits--one brought on behalf of retired principals and vice principals and the other on behalf of retired teachers--filed in the first circuit court. Each complaint sought declaratory and injunctive relief based upon the allegation that the ERS had miscalculated the benefits to which the Retirees were entitled under HRS ch. 88 by excluding the Retirees' "earned summer salaries," see supra note 3, from the computation of their "average final compensation" (AFC), as authorized by the "high-three method" described in HRS § 88-81(a)(1)(B), see supra note 2.

    The circuit court entered summary judgment in favor of the retired principals and vice principals, ruled that "the lump sum payment of 'earned summer salary,' paid upon retirement[,] was compensation attributable to the month in which the member of the class retired," and therefore ordered the ERS to include those amounts in the recalculation of the principals' and vice principals' AFC. Chun v. Employees' Retirement Sys., 73 Hawai'i 9, 10, 828 P.2d 260, 261, reconsideration denied, 73 Hawai'i 625, 829 P.2d 859 (1992) (Chun I ). The ERS appealed. Id. at 11, 828 P.2d at 261.

    In Chun I, this court vacated the circuit court's order granting summary judgment in favor of the principals and vice principals and, pursuant to Hawaii Blind Vendors Association v. Department of Human Services,

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    71 Hawai'i 367, 791 P.2d 1261 (1990), [87 Hawai'i 158] remanded the case "with the direction that the [circuit] court [further] remand the matter to the ERS for a full and fair administrative hearing" prior to any further judicial action. Chun I, 73 Hawai'i at 11, 14, 828 P.2d at 261, 263. Based on Chun I, the circuit court likewise remanded the retired teachers' complaint to the ERS for an administrative hearing. The two matters were then consolidated for hearing by the Board.

    Before the administrative hearing commenced, the Retirees moved: (1) to disqualify two trustees of the ERS--Kenneth Matsuura and Annette Hee--from participation in the hearing on the basis of alleged "actual" bias; (2) to disqualify attorney Mark Bennett from representing the ERS at the hearing by virtue of an alleged conflict of interest; and (3) to postpone the hearing of the Retirees' appeals until (a) the recently created seat for a "retirant" trustee was filled, see supra note 4, and (b) the Board appointed an "administrator" in accordance with the provisions of HRS § 88-29, as amended, see supra note 5. The Board entertained arguments regarding the foregoing motions on February 27, 1995 and, four days later, orally denied them all.

    Beginning on March 1, 1995, the Board conducted an administrative "contested case" hearing of the Retirees' claims. On March 23, 1995, the Board entered the following written conclusions of law (COLs):

    1. [The Retirees] have the burden of producing evidence and the burden of persuasion in this matter. The degree of proof is by a preponderance of the evidence.

    2. Regulations of the Department of Education of the State of Hawaii refer to the Summer Months as summer vacation; there is no statutory definition of the term "payment of salary in lieu of vacation" as that term is used in HRS § 88-81.

    3. [The ERS's] longstanding practice and its construction of HRS § 88-81 in treating the Summer Months as paid vacation and the Lump Sum Payment as payment of salary in lieu of vacation is correct.

    4. [The ERS's] longstanding practice and its construction of HRS § 88-81 in that regard conforms with law, is consistent with the [ERS's] treatment of other State employees and retirees[,] and is not unfair or unjust to [the Retirees] or to other State employees or retirees.

    Based upon these COLs, the Board entered a "decision" denying all of the Retirees' claims.

    On April 21, 1995, pursuant to HRS § 91-14 (1993), the Retirees appealed the Board's decision to the circuit court, contending that the Board had reversibly erred in (1) interpreting the relevant statutes, (2) denying their prehearing motions, and (3) defectively conducting the hearing. After hearing oral argument, the circuit court, on March 4, 1996, entered its "final order," which reversed the Board's March 23, 1995 decision and order, ruled "[a]s a matter of law" that "the Board's interpretation and application of HRS[ ] § 88-81 [was] clearly erroneous," and reasoned as follows:

    The Board's decision that teachers, vice principals[,] and principals receive paid vacation is...

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