In re Arbitration Between Haw. State Teachers Ass'n, SCWC-11-0000065.
| Docket Number | SCWC-11-0000065. |
| Decision Date | 11 August 2017 |
| Parties | In the MATTER OF the Arbitration between HAWAI`I STATE TEACHERS ASSOCIATION, Respondent/Union-Appellant, and State of Hawai`i, Department of Education, Petitioner/Employer-Appellee. |
| Court | Hawaii Supreme Court |
In the MATTER OF the Arbitration between
HAWAI`I STATE TEACHERS ASSOCIATION, Respondent/Union-Appellant,
and
State of Hawai`i, Department of Education, Petitioner/Employer-Appellee.
SCWC-11-0000065.
Supreme Court of Hawai`i
August 11, 2017
Attorney(s) appearing for the Case
Robert T. Nakatsuji , Honolulu, for petitioner.
Herbert R. Takahashi and Rebecca L. Covert , Honolulu, for respondent.
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY NAKAYAMA, J.
I. INTRODUCTION
At issue is whether the doctrine of sovereign immunity protects the State from an arbitrator's award of prejudgment interest. We hold that, under the facts of this case, it does not. Because judicial review of an arbitration award is confined to the strictest possible limits, and because the arbitrator in this case reasonably interpreted the arbitration agreement in fashioning the award, we hold that the arbitrator did not exceed his authority in awarding prejudgment interest against the State. We also hold that the award of attorneys' fees and costs on appeal was proper.
Thus, we affirm the Intermediate Court of Appeals' (ICA) November 21, 2016 judgment on appeal, which 1) vacated in part the Circuit Court of the First Circuit's (circuit court) February 24, 2011 final judgment, 2) reversed the circuit court's January 4, 2011 orders, 3) affirmed the circuit court's January 31, 2011 order, and 4) granted Hawai`i State Teachers Association's (HSTA) request for fees and costs.
II. BACKGROUND
A. Arbitration Proceedings1
On July 18, 2008, Kathleen Morita (Morita or grievant), a public school teacher, was terminated from her job for allegedly smoking marijuana and possessing alcohol while in her classroom at Hau`ula Elementary School.
[400 P.3d 586]
HSTA filed a grievance on Morita's behalf and an arbitration hearing was held pursuant to the collective bargaining agreement (the agreement) between HSTA and the Hawai`i State Department of Education (State or Employer).
Article V of the agreement outlines the grievance procedure, which provides that a grievant may request arbitration. Article V.G.2.f provides the arbitrator with the authority to enter an award in favor of the grievant if the arbitrator finds that the Employer's actions were improper:
When the arbitrator finds that any disciplinary action was improper, the action may be set aside, reduced or otherwise modified by the arbitrator. The arbitrator may award back pay to compensate the teacher wholly or partially for any salary lost. Such back pay award shall be offset by all other compensation received by the grievant(s) including but not limited to unemployment compensation or wages.
On May 7, 2010, the arbitrator issued a decision and award, which sustained the grievance because the State lacked just cause to terminate Morita. The arbitrator ordered that Morita be restored to her position at Hau`ula Elementary School and be given back wages "with interest at the rate of ten (10) percent per annum on any unpaid amounts that are due and owing." The arbitrator also noted that he would "retain limited jurisdiction for a period not to exceed 6 months from the date of this award to assure compliance with the award."
On July 28, 2010, HSTA filed a motion for final decision and award requiring the State to pay Morita $30,454.57 in backpay, plus ten percent interest until the amount was fully paid. In its memorandum in support of the motion, HSTA explained that there "has been no compliance with the remedial terms of the award ... as to back pay by Employer" and requested that the arbitrator enter a final decision in order to settle any remaining disputes over the calculation of the award between the parties.
On September 27, 2010, the arbitrator entered a compliance order. In it, the arbitrator noted that the State had filed a July 22, 2010 motion to strike or vacate the interest portion of the award with the circuit court and that this motion was still pending at the circuit court level.2
As to the issues of backpay and interest (also labeled throughout the proceedings as prejudgment or backpay interest), the arbitrator offered the following explanation:
While the Union has requested a final award and order which fixes the amount of backpay and interest, the Arbitrator has elected to treat it as a compliance matter pursuant to his continuing jurisdiction because the May 7, 2010 decision and award was final except for what normally would have been ministerial mathematical calculation. As a general proposition, Arbitrators are authorized to proceed under the authority permitted by the collective bargaining agreement and the Uniform Arbitration Act, HRS, Chapter 658A. As previously indicated in the order of June 16, 2010, the Arbitrator believes that he is acting in conformity tithe [sic] Collective Bargaining Agreement and the authority granted by HRS, Chapter 658A in the determination that any backpay award includes interest at the rate of 10 percent per annum. The purpose of an award of backpay including interest is to make whole financially the Grievant had she not been terminated. Elkouri & Elkouri, How Arbitration Works, 6th Ed. 2003, p. 1224. Payment to the Grievant of wrongfully withheld pay without interest would not restore her whole as loss of use of funds for that period entailed either deprivation or additional costs to the Grievant if she had to borrow funds to replace lost wages while awaiting the results of her grievance. The doctrine of interest assessed by an arbitrator as compensation or penalty to prevent further damages is demonstrated by Morrison-Knudsen Company vs. Makahuena Corporation and Tea Pacific, Inc., 66 Haw. 663 [675 P.2d 760] (1983) and Sussell vs. Civil Service Commission of the City & County of Honolulu, 74 Haw [sic] 599 [851 P.2d 311] (1993).
[400 P.3d 587]
As such, the arbitrator reaffirmed his May 7, 2010 determination that Morita was entitled to interest on unpaid backpay, but left the calculation to the parties:
The Grievant is entitled to a reimbursement of backpay of $25,169.05 excluding interest for the period from August 1, 2008 to May 31, 2010. She is also entitled to interest on any unpaid backpay at the rate of 10 percent per annum. Since the Employer has indicated the possibility of appealing at least the interest portion of the award, no amount is set forth as to accrued interest. If the Employer does not contest the principal amount of the backpay, it should be paid forthwith as it may be the source of the repayment by the Grievant of retirement benefits received from the State of Hawaii Retirement System. The calculation of accrued interest is left to the parties using financial management software. The calculation should assume the deficit in backpay accrued monthly from August 1, 2008 by dividing the aggregate deficit in backpay for each year by the number of months that the unpaid deficit remained unpaid multiplied by the rate of 10 percent per annum until paid.
B. Circuit Court Proceedings3
On May 18, 2010, HSTA filed a motion to confirm the arbitration award, entry of judgment and allowing costs and other appropriate relief with the circuit court. The State filed a response, arguing that Morita was not entitled to the awarded interest and opposing HSTA's request for attorneys' fees and costs.
Confusion appears to have arisen when the State filed two separate motions, which sought the same relief from the arbitrator's award of interest, but relied on different statutory grounds. The first, filed on July 9, 2010,4 was the State's motion to modify or correct the arbitration award (motion to modify award), in which the State sought to modify the portion of the arbitrator's decision that awarded prejudgment interest on the backpay. This motion was brought pursuant to Hawai`i Revised Statutes (HRS) § 658A-24 (Supp. 2010).5
HSTA's motion to confirm and the State's motion to modify the award were heard on July 15, 2010. At the hearing, the State also made an oral request to file a motion to vacate the award.
The second of the State's written motions, filed on July 26, 2010,6 was the State's motion to vacate in part the arbitration award (motion to vacate award), in which the State sought to vacate the portion of the arbitrator's decision that awarded prejudgment interest on the backpay. This motion was brought pursuant to HRS § 658A-23 (Supp. 2010).7 On September 13, 2010, a hearing was
[400 P.3d 588]
held on the State's motion to vacate award. The circuit court orally granted the motion and vacated the portion of the award that gave Morita prejudgment interest. Counsel for HSTA was not at the hearing. Both parties assert that there was a service error and that HSTA did not receive notice of the hearing date until after the hearing.
On October 7, 2010, HSTA filed a motion for reconsideration of the State's motion to vacate award, arguing that HSTA did not receive notice of the hearing on the State's motion. A hearing on HSTA's motion for reconsideration was held on November 22, 2010. Both parties appeared and argued as to whether the doctrine of sovereign immunity applied when awarding prejudgement interest. At the close of the hearing, the circuit court took the matter under advisement. The following day, November 23, 2010, the circuit court entered a minute order denying HSTA's motion for reconsideration.
Meanwhile, on October 1, 2010, the circuit court entered three orders and one judgment: 1) Order Denying Employer's Oral Motion For Leave to File Motion to Vacate Award Dated May 7, 2010, Filed Orally on July 15, 2010; 2) Order Denying Employer's Motion to Modify or Correct Award Dated May 7, 2010, Filed on July 18, 2010;8 3) Order Granting in Part and Denying in Part Motion to Confirm Arbitration Award, Entry of Judgment and Allowing Costs and Other Appropriate Relief Filed on May 18, 2010;9 and 4) Judgment (October judgment).
The October judgment reads in its entirety as follows:
Pursuant to the 1) order granting in part and denying...
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