Chun v. BOARD OF TRUSTEES OF THE EMPLOYEES'RETIREMENT SYSTEM

• Decision Date: 31 January 2005
• Docket Number: No. 23892,23892
• Citation: 106 P.3d 1120,106 Haw. 477
• Parties: 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 HAWAI`I; AND EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAI`I, Appellees-Appellants/Cross-Appellees. VALERIE YAMADA SOUTHWOOD, Appellant/Appellant-Appellant and BARBARA JANE LUKE, Appellant-Appellee/Appellant-Appellant v. BOARD OF TRUSTEES OF THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAI`I; AND EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAI`I, Appellees-Appellants/Appellees-Appellees. CYNTHIA C. CHING, Class Member/Party-In-Interest-Appellee.
• Court: Hawaii Supreme Court

106 P.3d 1120

106 Haw. 477

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 HAWAI`I; AND EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAI`I, Appellees-Appellants/Cross-Appellees.

VALERIE YAMADA SOUTHWOOD, Appellant/Appellant-Appellant and BARBARA JANE LUKE, Appellant-Appellee/Appellant-Appellant v. BOARD OF TRUSTEES OF THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAI`I; AND EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF HAWAI`I, Appellees-Appellants/Appellees-Appellees.

CYNTHIA C. CHING, Class Member/Party-In-Interest-Appellee.

No. 23892

In the Supreme Court of Hawaii.

January 31, 2005.

On the briefs:

Charles K.Y. Khim, for appellants-appellees/appellants-appellants

Michael Chun, et al.; and Valerie Yamada Southwood, et al.

Mark J. Bennett and Carrie K.S. Okinaga, of McCorriston Miller Mukai MacKinnion LLP, for appellees-appellants/appellees-appellees

Board of Trustees of the ERS and the ERS.

MOON, C.J., LEVINSON, NAKAYAMA, AND ACOBA, JJ, AND CIRCUIT JUDGE MASUOKA, IN PLACE OF DUFFY, J., RECUSED.

OPINION OF THE COURT BY LEVINSON, J.

The appellees-appellants/appellees-appellees Board of Trustees of the Employees' Retirement System (ERS) of the State of Hawai`i [hereinafter, "the Board"] and the ERS [collectively hereinafter, "the ERS"] appeal from the October 18, 2000 order of the circuit court of the first circuit, the Honorable Eden E. Hifo presiding, following remand from this court regarding attorneys' fees and postjudgment interest for retired teachers of the class action [hereinafter, "the order granting fees and interest"].

The appellants-appellees/appellants-appellants Michael A.S. Chun, Gladys Farm, Herbert T. Imanaka, Jimmy Izu, Samuel Y. Kakazu, Billy G. Southwood, Eishin Tengan, and Thomas Y. Yano [collectively hereinafter, "the Principals and Vice Principals"], as well as Valerie Yamada Southwood and Barbara Jane Luke [collectively hereinafter, "the Teachers"] [both classes collectively hereinafter, "the Retirees"] appeal from the following orders of the circuit court of the first circuit, the Honorable Eden E. Hifo presiding: (1) the October 18, 2000 order granting fees and interest;¹ and (2) the February 14, 2001 order granting the ERS's December 19, 2000 motion for partial stay of proceedings to enforce the order granting fees and interest pending appeal [hereinafter, "the order granting stay of proceedings"].²

On appeal, the ERS argues, inter alia, that the circuit court erred in entering the order granting fees and interest, inasmuch as "sovereign immunity bars the award of postjudgment interest."³ In response, the Retirees contend, inter alia, that "there is no merit to [the ERS's] sovereign immunity argument."

In their cross-appeal of the order granting fees and interest, see supra note 1, the Retirees allege that the circuit court erred in entering the order granting fees and interest for the following reasons: (1) the circuit court should not have excluded an "award of postjudgment interest" "from the `percentage of the common fund'<sup>4</sup> calculation of attorney[s'] fees"; (2) the circuit court should not have excluded "the gross amount recovered for [the Retirees]" "from the percentage of the common fund calculation of attorney[s'] fees"; (3) the circuit court should not have applied "the federal court's precedent rather than [the standards of] Hawai`i appellate court[s, which were] enunciated in [In re Chow, 3 Haw. App. 577, 656 P.2d 105 (1982)]," or, in the alternative, the circuit court erred in its application of federal precedent; (4) the circuit court "fail[ed] to enforce the implied agreement to pay [the Retirees] investment income earned on wrongfully withheld back retirement benefits"; and (5) the circuit court "fail[ed] to enforce the expressed agreement to pay [the Retirees] the premium or interest on back retirement benefits."

The ERS counters, inter alia: (1) that "in calculating the common fund, the [circuit] court did not abuse its discretion in excluding its postjudgment interest award to the [T]eachers' class"; (2) that "in calculating the common fund, the [circuit] court did not abuse its discretion by excluding the `offset' for mandatory contributions ordered by Judge Nakatani"; (3) that "in this common fund case, the [circuit] court did not abuse its discretion by applying the 25 percent benchmark adopted by the [N]inth [C]ircuit [C]ourt of [A]ppeals" and "did not abuse its discretion by declining [Charles Khim's (i.e., the Retirees' counsel's)] request for [one-third] percentage of the common fund"; (4) that "the lower court never addressed, nor was it asked to address[,] an `implied contract' theory of recovery for interest, and [the Retirees] are precluded from raising this new issue on appeal"; and (5) that "the [circuit] court correctly declined to grant [pre]judgment interest to [the Teachers] on the basis of the existence of a private stipulation entered between the ERS and the retired principals' and vice principals' class."⁵ (Emphasis in original.)

In their appeal from the order granting stay of proceedings, seesupra note 2, the Retirees allege that "the [circuit] court erred in not requiring the [ERS] to pay postjudgment interest upon the monetary award issued by the [circuit] court on October 18, 2000 as a condition of staying the operation of said October 18, 2000 monetary award." The ERS responds (1) that "[t]he circuit court was correct in declining to award interest as a condition of the stay pending appeal, because such an award would violate [HRS] § 478-3 [(1993)⁶]," and (2) that, "even if the circuit court could have awarded interest upon interest under [HRS] § 478-3, it is within the court's discretion to have decided not to condition the stay pending appeal on payment of interest."⁷

For the reasons discussed infra in section III, we hold: (1) that the State is immune from awards of HRS § 478-3 postjudgment interest in HRS § 661-1 (1993)⁸ actions, such that the circuit court erred in awarding postjudgment interest to the Retirees; (2) that, based on the foregoing holding, the circuit court did not abuse its discretion in excluding postjudgment interest from calculation of attorneys' feesbecause the ERS is immune from the assessment of postjudgment interest; (3) that the circuit court did not abuse its discretion in excluding the "offset" from calculation of attorneys' fees because the March 4, 1996 final order expressly limited attorneys' fees by excluding the offset; (4) that the circuit court did not abuse its discretion in ordering that attorneys' fees be set at twenty-five percent of the common fund because no controlling precedent required the circuit court to award a specific amount; (5) that the circuit court did not err in failing to address investment income because to do so would have exceeded the scope of this court's mandate on remand; (6) that the circuit court did not abuse its discretion in failing to award the Teachers prejudgment interest because the Teachers are barred from such an award by HRS § 661-8 (1993);⁹ and (7) based on our holding that the State is immune from awards of HRS § 478-3 postjudgment interest in HRS § 661-1 actions, the circuit court did not err in refusing to order the ERS to pay postjudgment interest upon the order granting fees and interest as a condition of staying the execution of that order.

Accordingly, we (1) affirm the portion of the October 18, 2000 order as to the granting of attorneys' fees, i.e., paragraphs one through thirteen of the order and paragraph two of the decree, (2) reverse the portion of the October 18, 2000 order granting postjudgment interest, i.e., paragraphs fourteen through twenty of the order and paragraph one of the decree, and (3) affirm the February 14, 2001 order granting stay of proceedings.

I. BACKGROUND

A. Chun I through Chun III

As a preliminary matter, we note the following background, set forth in Chun v. Board of Trustees of Employees' Retirement Sys. of State of Hawai`i, 92 Hawai`i 432, 992 P.2d 127 (2000) (Chun III):

A. Chun I

Prior to retiring, the Retirees (as public school principals, vice principals, or teachers) were all "ten-month" employees of the Department of Education (DOE). The present appeal arises out of two class action lawsuits — one (Chun) brought on behalf of retired principals and vice principals and the other (Southwood) on behalf of retired teachers — filed in the first circuit court. Each complaint sought relief based upon the allegation that the ERS had undercalculated the benefits to which the Retirees were entitled. The circuit court (1) entered summary judgment in favor of the retired principals and vice principals, (2) 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 (3) ordered the ERS to include those amounts in the recalculation of the principals' and vice principals'" average final compensation." Chun v. Employees' Retirement Sys., 73 Haw. 9, 10, 828 P.2d 260, 261 (1992) (Chun I). The ERS appealed. In Chun I, this court vacated the circuit court's order and remanded the case with directions that the circuit court remand the matter to the ERS for a full administrative hearing before the Board. Id. at 11, 828 P.2d at 263. Based on Chun I, the circuit court likewise remanded the claims asserted in Southwood for an administrative hearing.

B. Chun II

Subsequent to the administrative hearing, on March 23, 1995, the Board issued a "decision" denying all of the Retirees' claims. Chun v. Employees' Retirement Sys., 87 Hawai`i 152, 158, 952 P.2d 1215, 1221 (1998) (Chun II). The Retirees appealed the Board's decision to the circuit court. Id. On March 4, 1996, the circuit court entered its "final

...