Case Title: Honda v. Board of Trustees of the Employees' Retirement System of the State of Hawaii

Citation: 108 Haw. 338

Docket Number: 

State: hawaii

Court: Hawaii Supreme Court

Date: 2005-09-15T00:00:00Z

Document:
LAW LIBRARY
‘*#*P0R PUBLICATION***
eee
IN THE SUPREME COURT OF THE STATE OF HAWAI'I

 

000"

—_— SSS
KATSUMI HONDA, Deceased, by ARLENE S. KAMAKANA,
SPECIAL ADMINISTRATOR OF THE ESTATE OF HELEN SHIZUKO
HONDA, Deceased, Petitioner, Appellant~Appellee
BOARD OF TRUSTEES OF THE EMPLOYEES’ RETIREMENT
SYSTEM OF THE STATE OF HAWAT'I, Appellee-Appellant
No. 23625

MOTION FOR RECONSIDERATION
(CIV. NO. 99-3473)

SEPTEMBER 15, 2005

 

NE :Z Md G1 das Sie
aa

oSUIR RIANA, ROouR, JU. AND CLROULT JUDGE
Det ROSARIO, IN PLACE OF DUFFY, J.y RECUSED)
xo LevINSon, 9-7 DISSENTING, WI3H WHOM HOON, C-J-y JOINS)

Appellee-Appellant Board of Trustees of the Employees’
Retirenent System of the State of Hawai'i (the ERS or ERS Board)
filed a notion for reconsideration (the motion) of this court's
une 17, 2008 published opinion (the opinion), which (1) vacated
the July 28, 2000 final judgment of the circuit court of the
iret circuit (the court) and (2) remanded the case to the court
with instructions to remand the case to the ERS to hold further
proceedings. Honda vy, Bd, of Trs, of the Employees’ Ret, Sys,
No. 23625, slip op. at 2-2, (Haw. une 17, 2005).

In the motion, the ERS Board argues that this court has

violated the separation of powers doctrine by (1) “cloaking the
***FOR PUBLICATION*#*

ERS with the jurisdiction to decide contract and tort clains,”
(2) “waiving the State's sovereign inmunity for those clains,”
and (3) “vesting the court with the legislative function of
deciding a new set of fiduciary duties for ERS.” Tt requests
that this court “reconsider (the] opinion and decide this appeal
fon the argunents presented in the parties’ briefs.” In the

e the

 

alternative, the ERS Board asks that this court vacat

opinion and allow the parties to brief this court regarding the

 

mattere decided in the opinion and the question of whether the

Helen Honda

 

untimely passing of Petitioner /Appellant-Appelle
(tielen) has rendered some or all of the issues presented in this
appeal moot."

on August 15, 2005, this court filed an order directing
Helen to respond to the motion for reconsideration. on
September 2, 2005, Helen filed a memorandum in opposition to the
motion, arguing that (1) the opinion does not require ERS to
adjudicate tort and contract claims, (2) the opinion does not
waive sovereign immunity for tort and contract claims, and
(3) ERS and its trustees have a fiduciary duty to its menbers.
Inasmuch as the opinion did not “overlook” or “misapprehend” the

matters raised by the ERS, the motion for reconsideration is

 

*  deten died on May 30, 2003. On August 25, 2005, Arlene 8.
Kanakana (Kanakana), Special Administrator of the Estate of Helen Shizuko
Honda, wes substitutea as the proper party Appellee pursuant to Hawai't aules
Of Appellate Procedure (WRAP) Rule 43{e) (2005). For purposes of this
opinion, however, the reference to Helen made 1a the originel opinion i=
retained

   

 

 

 
‘**#F0R PUBLICATION*#*

denied.”

 

In its first point, the ERS Board argues that the ERS
does not have jurisdiction to decide remedies under Hawai't
Revised Statutes (HRS) chapters 661 and 662? because the circuit
courts have original jurisdiction to hear contract and tort
claims against the State and the ERS can only interpret and apply
HRS chapter 88. These arguments are based upon a misreading of
the opinion.
a.

‘The ERS Board states that the opinion “appears to vest
ERS with the jurisdiction to decide and provide remedies for
clains for rescission of contract and the torts of breach of
fiduciary duty and negligent misrepresentation.” (Emphasis
added.) The opinion, however, does not direct the ERS to “decide
civil, judicial remedies,” but remands the case to the ERS Board
for it to hold further proceedings in light of its fiduciary duty
to retirees. Slip op. at 3, 24. The theories of unilateral
mistake and negligent misrepresentation were discussed in the
opinion to illustrate the basis upon which the ERS‘s failure to
provide Katsumi Honda (Katsumi) “with clear, understandable

information concerning retirement benefits” might be premised.
+ RAP 40(b) (2008) provides that a motion for reconsideration
wehail state with particularity the pointe of law or fact that the moving

party contends the court hes overlooked of sisapprehended, together with a
Brief argument on the points raised.”

 

> as chapter 661 governs actions by and against the state and HRS
chapter 662 fe the State Tort Liability Act.

3
‘***FOR PUBLICATION***

 

Slip op. at 1, Indeed, as the opinion states, the court’s
judgment was vacated and the case xenanded “pursuant to HRS § 91-
14(g)."" Slip op. at 24. Accordingly, this court did not
Yoverlook” or “misapprehend” the ERS Board’s jurisdiction to
decide and provide remedies.
8.
The ERS Board further argues that “{nJo statute

authorizes ERS to allow an

 

yet unasserted estate or personal
representative of a beneficiary to change an ERS member's

retirement option” and that “[oJn remand, ERS is therefore left
in the position of either exceeding its statutory authority or

violating this court's order.” First, it should be noted that

 

none of the parties notified this court of Helen’s death prior to
the filing of the opinion. Hence, this court could not have

“misapprehended” a fact that was never presented to it.

 

«ns § 91-1619) (1993) provides:

(a) Upon review of the record the
decision of the agency or remand the case with instructions
for further proceedings; of it may reverse or modify the
Gecision and’ order if che substantial rights of the
petitioners may have been prejudiced because the
Rauinistrative findings, conclusions, decisions, or orders

 

sourt_ may affirm the

 

 

(2) In violation of the constitutional of statutory
provisions? oF

(2) Th excess of the statutory authority or
jusisdiction of the agency: OF

(3) Made spon onlawfol procedure) or

(a) Affected by other error of Law; or

{5} Clearly erfoneous in view of the reliable,
Probative, and substantial evidence on the whole
Fecord; or

(6) Arbitrary, oF capricious, of characterized by
bose of discretion or clearly unwarranted
exercise of discretion

 

 

4
‘**#FOR PUBLICATION***
se
According to a declaration attached to the motion,

Deputy Attorney General Diane S. Kishimoto spoke with Helen’s
attorney, Reid Nakamura, on June 21, 2005, at which time he
informed her that Helen “had passed away approximately two years
ago.” Kishimoto declares that to “the best of (her] knowledge,
this [vas] the first time (the ERS Board had] learned of
elen’s} death.”

Pursuant to HRAP Rule 43(a),

LiJf a party dies after the notice of appeal is f1led, or
hile the proceeding is otherwise pending in a Hawai'i
Gppeliate court, 2

a i a a

 

Heettiete'tierk: “the notion of a party shall be served upon
2p raiterentative in accordance with the provisions of Rule
25 "Ip the deceased party has no representative, any party
‘uai_suasast the death oa the record, and proceedings shell

(Emphases added.) In the criminal context, HRAP Rule 43 has been
construed to afford the appellate court with two options in the
absence of 4 motion for substitution as follows:

‘The appellate court may, in its discretion, allow for
fubstitution of a proper party-defendant. ‘Absent such =
fotion, the appellate court nay, in its discretion, either
Ti) dississ the appeal. as most, vacate the original judgment
SF conviction, and dismiss all relsted criminal proceedings,
Gr, in che alternative, (2) enter such other order as the
Gppellate court deens appropriate pursuant to MRAP Rule
Gar

 

 

  

State v. Makaila, 79 Hawai'i 40, 45, 897 P.2d 967, 972 (1995).
Because @ “death” of a party had been “suggest [ed], on

August 11, 2005, this court ordered (1) Nakamura to confirm

Helen's death by filing a death certificate in this court and

(2) for either party to move for substitution of a proper party

Appellee pursuant to HRAP Rule 43(a) or advise this court that no

3
‘***FOR PUBLICATION*#*

motion would be filed. On August 25, 2008, following the probate
court's appointment of Kanakana, Helen's daughter, as Special
Administrator of the Estate of Helen Shizuko Honda, Nakamura
filed a motion to substitute Kanakana as the proper party
Appellee. This court granted the motion for substitution on

ntative of the

 

August 25, 2005. See supra note 1. A repr

 

beneficiary has thus been identified. If in any way relevant,
the event of Helen’s death has becone part of a case which has
been remanded. Therefore, this matter was not “misapprehended”
or “overlooked.”

Second, it should be emphasized that because “the ERS
made no findings with respect to the specific nature and
sufficiency of information provided to Katsumi,” slip op. at 24,
the opinion remands the case to the ERS to hold further
proceedings “in the framework of the entire record and in view of
the ERS’s fiduciary duty to retirees,” id, The opinion confirms
the ERS’s fiduciary duty, but the application of that duty has
been remanded to the board in light of the principles established
in the opinion. As discussed infra, the remand is consistent
with HRS chapter 88 and, hence, does not compel the ERS Board to
“exceed[] its statutory authority.”

m,
Relatedly, in its second argument, the ERS Board

maintains that the courts cannot waive the State’s sovereign

immunity because, (1) pursuant to Chun v. Bd, of Trustees of the
‘***FOR PUBLICATION*#*
Employees’ Retirement Svs., 106 Hawai'i 416, 106 P.3d 339 (2005),
the legislature must expressly waive immunity, (2) pursuant to
Pele Defense Fund v. Paty, 73 Haw. 578, 609-10, 837 P.2d 1247,
1266 (1992), “relief that is tantamount to an award of damages
for a past violation of law, even though styled as something
else, is barred by sovereign immunity(,]" and (3) pursuant to
Edelman v. Jordan, 415 U.S. 651 (1974), equitable restitution,
Like other forms of danages, is barred by the state’s sovereign
immunity.

As in the first argument, however, these points all
stem from the ERS Board’s presumption that the opinion determined
contract and tort remedies. It should also be noted that the ERS
did not raise the issues of sovereign immunity and “retrospective
injunctive relief and damages” until after the opinion was filed.
Accepting its view of the essential nature of the case, for the
sake of argument, the ERS had multiple opportunities to raise the
defense.

Although Helen’s request for “a declaratory order . . «
allowing [her] to select new mode of retirement for Retirant
Katsumi Honda, deceased, to be effective retroactively to
April 1, 1994[,]" and the court's order implicated what the ERS
now characterizes as sovereign immunity concerns in reference to
“retroactively,” “benefits,” and “pay,” the ERS did not raise
sovereign immunity arguments at the agency hearing, in its agency

decision, or on the appeal to the court. The court’s July 6,
***F0R PUBLICATION*+*

 

2000 findings of fact and order reversing the decision of the ERS
Board and awarding relief to Katsumi, by Helen stated, inter

alia, as follows:

2. The relief requested by Petitioner/Appellant in
ste pening Brief... shall hereby be granted. The
specific grant of relief by this Order ig the authorization
for Mrs, Helen 8, Honda to revise Mr, Katsumi Honda,
Geceased’s election of a node of distribution of retirement
Gilowance to one of the three statutorily authorized methods
Seserined in [HRS] §88-263.. Such revision of the election
Of a nethod of distribution shall be made within €0 days
from the date of entry of this Order and shall apply
Eetroactively to the date of lr. Kateuni Honda's retirement,
peti 1, 1994." Benefits shall be calculated in the
following manner:

 

 

1)" From Appl 1. 199 to the date of Me. Kateumi
Honda's death, the Denefits payable shall be based upen Mr.
Honda’s entitioment as a Clase c retirant’

2 ua , [plenefies
shali be payed [sic] to Mrs. Honda as the beneficiary under
the method Sf distribution selected until - -- Mra. Honda's
Eights to such enefits shall terminate as provided under
uch election.

‘The payment of such benefits shell be made forthwith.

 

 

(Some emphases in original and some added.) Even after the court
ordered the ERS to allow Helen to select @ new retirement option
and to pay her benefits, the ERS did not raise the issue of
sovereign immunity in its briefs before this court.

Now, in its motion for reconsideration, the ERS Board
refers to “retrospective relief” and a “retrospective danages
award[.]” Previously, the ERS Board had obviously believed the
doctrine of sovereign immunity did not apply. The failure to
raise this issue in the history of this appeal renders the ERS
Board's sovereign immunity argunents on a motion for
reconsideration unconvincing. This court could not have

“overlooked” or “misapplied” what was not raised.
‘**#FOR PUBLICATION***
eee

‘The ERS Board additionally argues that “even if the
contract and tort claims could be brought against the State --
which under Chapter 91 they could not -- the court has overlooked
the two-year statutes of Limitation[,]” HRS 5§ 661-5" and 662-4.°
Helen, however, filed an administrative appeal pursuant to HRS
§ 91-14, ‘The ERS did not refer to any statute of limitations
during the appeal. Again, the opinion could not have
“overlooked” or “misapprehended” what was not raised.

qn.

Finally, the ERS Board asserts that “(aJbsent statutory
authority, this court lacks jurisdiction to assign a new trust
duty to ERS.” Its subsidiary points are that (1) “[n]o statute
in Chapter 88 provides that ERS owes a duty, let elone a
fiduciary duty, to individual menbers to provide individual.
notice and counseling, particularly absent a request for
information” (emphases in original), (2) “[o]ther state courts

5 uRS § 661-5 (1993) provides:

661-5 Limitations on action. Every claim against
the stste, cognizable under this chapter, shall be forever
barred unless the action ¢ commenced within two years after
the cleim first accrues? provided that the clains of persons
Under legal disability shall not be barred if the action 1s
Comsenced within one year after the disability has ceased.

 

 

(Baphasis added.)
«ars § 662-¢ (1993) states:

662-4 statute of Limitations. A tort claim against
tthe state shall be forever barred uniess action is begun
Within two years after the claim accrues, except in the case
Of a medical tort claim when the limitation of action
provisions set forth in section 6577.3 shall apply,

 

18 added.)

 
***FOR PUBLICATION***

 

have held that because retirement systems are creatures of
statute, a court has no authority to impose new requirements on
them[,]” (3) “ERS’s duty to responsibly manage state funds may
extend a general duty to ERS members as a whole to ensure that
the State will have sufficient money to meet its statutory
obligations{,]” (4) “(elven under [the Employees Retirement and
Income Security Act (ERISA)], the majority of courts . . . have
not imposed upon an ERISA plan fiduciary the duty individually to
notify participants and/or beneficiaries of the specific impact
of the general terms of the plan upon them” (internal quotation
marks and citation omitted), (5) “[a]bsent a request from the
member, it is also impossible for ERS to anticipate each of the
approximately 99,000 members’ needs before they retirel,}” and
(6) the legislature “grants the [BRS] Board discretion regarding
how to administer state ERS funds, but it vests the authority
regarding what benefits will be paid out, to whom, and when, with
itself.”

Before addressing these subsidiary points, it must be
observed that the opinion cites to an opinion of the Attorney
General's office itself that had previously determined that “the
tuustees of the [ERS] are, in both common and legal
contemplation, trustees . . . entrusted with the duty and
responsibility of administering the System for the benefit of the

members of the System.” Slip op. at 20 (citing Op. Att'y Gen.
 

FOR PUBLICATION***
SSSSSSsseseseses

No. 64-25, at 8 (1964)) (emphases added). Trust duties, then,
are hardly “new” to the ERS Board.
a.

In point (1), the ERS Board maintains that “no statute
requires or implies that ERS must send out information to menbers
or counsel them on their retirement options.” But to the
contrary, 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 assune fiduciary
duties. Ses Chambrella v, Rutledge, 69 Haw. 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 Haw. 149, 153, 488 P.2d 1172,
1275 (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.”); Luv. Kwong,
39 Haw. 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 [s]tates 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 Haw. 151, 183-54 (1903)

("Directors stand towards the corporation which they represent
***FOR PUBLICATION*+*

 

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,
Ince, 4 Haw. App. 359, 361, 667 P.24 804, 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).

Additionally, 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 oves a
fiduciary duty to the beneficiary.” (Citing Reinecke v. Smith,
289 U.S. 172 (1933)))? see also Miller v, First Hawaiian Bank, 61
Haw. 346, 350, 604 P.2d 39, 42 (1979) (*[T]he trustee(] is under
a duty to communicate to the beneficiary material facts affecting
the interest of the beneficiary which he knows the beneficiary

does not know and which the beneficiary needs to know for his

 

+ part VIE governs retirement for clase © public officers and

employees, HRS chapter 88 pt. VII

 

2
‘***FOR PUBLICATION*#*
ee

protection in dealing with a third person with respect to his
interest.” (Quoting Reatatement (Second) of Trusts § 173, cmt. d
(1989). (Block format omitted.)).

‘The ERS Board contends that the “only trust duties

expressly imposed by Chapter 88 are those of a prudent financial

 

manager{,]" noting that the “two statutes that expressly
reference ‘trust’ duties are HRS $§ 88-110 and 88-127 (1993).”"

‘The ERS Board directs this court's attention to. the language in
HRS § 88-110 that “[t]he board of 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.” It also emphasizes the language in HRS § 88-127 as

 

follows:

talny and all suns contributed of paid from whatever source
to the systen for the funds crested by this part,

2/the ayetes including any and all. inte
Sarnings of the sane,

 

 

is

 

and
Pottthe nenbers of the aystam and shall not be subject to
appropriation for any other purpose whatsoever.

 

(Emphases in original.) The ERS Board, however, ignores the

phrase following the language it emphasizes, which states, “and
for the members of the aystem.” Thus, it would appear that the
ERS Board owes a “trust” duty to not just the “systen” as a
whole, as the ERS Board contends in point (3), but to the

“pembers of the system” as well.*

 

* The ERS Board states that ste “primary duty is to properly invest
and manage” the "é9 billion” in state funds." The existence of “prudent
Hinancial anager” duties, however, would not preclude the existence of other
fiduciary duties: Indeed, the Attoeney General has previously advised the ERS
Bosrd shat it is subject to “comuon-law restrictions” in aaaition to statutory
(cntinvet..)

 

 

B
‘***FOR PUBLICATION®
In a footnote, the ERS Board dismisses HRS § 88-27

 

(1993), which pertains to the “[oJath of trustees{,]” as not
“expressly refer(ring) to ‘trust’ duties." HRS § @8-27 provides,

in pertinent part, as follows:

Bach trustee shall, within ten days after the trustee’ s
appointment or election, take en oath of office that, so far
St devolves upon the trustee, the trustee will giligsntiy

 

     

‘EEgateng, and chat the trustee sili not knowingly violate or
SEilingly permit to be violated any of the provisions of law
applicable to the systes.
(Emphasis added.) Reading HRS $§ 88-27 and 88-127 in part
materia, see HRS § 1-16 (1993) ("Las in pari materia, or upon

the same subject matter, shall be construed with reference to

 

each other."), the ERS Board is charged with the duty to

“diligently and honestly administer,” HRS § 88-27 (emphasis

 

continued)
qualifications. See Op. Att'y Gen. No. 64-25, at 2. sae also Anantiad vs
90 Hawai'd 152, 166-7, 977 P-2d 260, 174-75 (1993) (concluding that
Stns’ 86-151 (2995) ous upon the Director of Labor the fiduciary
obligation of administering and maintaining the special compensation fund”
even though the statute does not expressly refer to fiduciary duties)
The ERS Board cites te
72 A.D.24 698. (W.Y. App. Oly. 1979], to support ite
Etgunent that ite ‘primary duty 12 to properly invest and manage [public
Pension] funds.” in liste, the retires argued that the comptrciler, "ae
Erustes of the retizenent’ fund, ha(d) an affirmative duty to make the members
auare of the benefits and insure that they receive the best possible
entitienent.”” Ld, at 900. “The New York appellate court responded that *[a)ny
Such duty. . . ie tempered by the bounds of reasonsbleness and the primary
duty of preservation of the fund.” Id, Tt held that “(to require the
(retirenent slysten to inform every applicant of the effect of their
retirenent date as indicated on their application in the absence of any
Fequest therefor before accepting said application would impose an
Unreasonable burden on the [s]ysten.”
The facts in Katsuni's case differ from the facts in Nutt. The
opinien requires the ERS to “provige retirees sutticigas iniamutien to mak
n dnfamed deciaian in electing  retizenent option.” Slip op: at 20
(quoting Ricks + Mfegcuri Local Gov't iaplovess’ fet, Gye.r Sb S.w.24 585,
382 (No. Ct. ADP. 1996)) (emphases added). Given that “(t]he choice of
Fetirencnt options is a pivotal decision that may substantially affect the
retires's quality of Living for the remainder of his or her life and the
Provision for loved ones upon the retiree’ death(,1” ad. at 23, this duty
Mould not “impose an unreasonable burden,” Mutt, 72 A.-24 at 900, on the ERS.

 

 

 

 

 

 

 

 

“4
***FOR PUBLICATION®**
eee

added), “all funds. . . held in trust . . . for the exclusive use
and benefit of the system and for the menbers of the system,” HRS
§ 88-127 (emphasis added). Diligence denotes “(vligilant
activity; attentiveness(.J” Black's Lav Dictionary at 457,
Hence, vigilance and attentiveness in administering the funds for
the benefit of ERS members would encompass the duty to provide
such members with understandable information of the retirement
options. The ERS Board’s contention that “(nJo statute in
chapter @8 provides that ERS owes a duty,” thus, is incorrect and
this court did not “misapprehend” or “overlook” the duties
accorded the ERS Board through its enabling statutes in chapter
88.
B.

Next, the ERS Board cites to case law from other

jurisdictions to support its point (2) that “because retirement

systems are creatures of statute, a court has no authority to

 

impose new requirements on them.” However, the fact that the ERS
Board was created by statute does not insulate it from common law
duties. The same Attorney General opinion cited in the opinion,
discussed supra, determined that the ERS Board may be subject to
conmon law trust duties, including the duty of loyalty. Op.
Att'y Gen. No. 64-25, at 2, The Attorney General advised that

the statutes governing the ERS Board

 

fe mainly declaratory of the common lav, and where the
Statute prescribes certain qualifications of
disinterestesnens,, it is noe necessarily inconsistent with,
fand may be held

EL EhE commensiaurrale saccoraingiy it is necessary €0

  

1s
‘***FOR PUBLICATION*#*

consider whether there are any applicable common-law
restrictions

Id. (emphasis added). Cf, Maxa v. John Alden Life ins, co., 972
F.2d 980, 985 (8th Cir. 1992) (*(A]s fiduciaries, the duties of
plan administrators [under ERISA] go beyond those specified in
the statute, and include duties derived from common law trust
principles.”). Therefore, the ERS Board’s contention that
“pecause retirement systems are creatures of statute, a court has
no authority to impose new requirements on them” and that
“whether the . . . ERS has a fiduciary duty to individual members
to ensure that they make ‘informed decisions’ is a non
justiciable question” are unavailing.’ This court did not
“impose” a “new” duty.

The ERS Board cites to Lee v. Board of Administration

ofthe Public Euplovees’ Retirenent Svstem, 181 Cal. Rptr. 754,
760 (Cal. Ct. App. 1982), for the proposition that “courts must

take a statute as they find it” and that if “its operation
results in inequity or hardship in some cases, the remedy
therefor{] lies with the legislative body.” Although the court
in Lee denied the plaintiff retirement benefits under the

applicable statute, id., the court entertained the plaintif#’s

 

+ Accordingly, the ERS Board's reliance on City of New York ve
Schgeck, 62 N.E.26 104 iN.¥, Ce. App. 1545), for the proposition that “[i}n
equity, a court has no power to direct how a statutory trustee performs its

   

Guties,"4a misplaced. "Although the Schogck court helé that “such equitable
Principles have no application in case... . where the pension fund is

 

Created by statute and the powers and cities of the board of trustees of the
fund aze defined ond regulated by statute(,]" id. at 108, it determined thet =
court could direct the board of trustees to perform its duties under the
Statues, id. ar 103, Ultimately, the Schosck court ordered the board to pay
the employes from the pension fund. Lae
‘***F0R PUBLICATION*#*

alternative argument that the retirement system was “nonetheless
estopped from denying her claim” due to “misleading” retirement
Literature, id. at 761 (emphasis added). Lee, then, did not
altogether preclude judicial relief.

Moreover, Lee implicitly held that retirement
information provided to the employee must be “clear.” Id, at
762. ‘The Lee court determined there was no estoppel because the
“retirement pamphlets distributed by [the retirement system madel
clear that the information provided therein [was] general and
simplified and [did] not purport to be the definitive statement
of the retirement law.” Id, (emphasis added). In contrast here,
the ERS’s retirement application form and pamphlet “did not
contain unambiguous and understandable terms” but, rather,
“contained insufficient and seemingly inconsistent information.”
Slip op. at 21.

‘The ERS Board also relies on Kinzy v. Oklahoma, 20 P.3d
818, 822 (Okla. 2001), for the rule that a public retirement
system “whose authority is deraigned solely from statute
. + [y] is without power to act in a manner contrary to what
the law prescribes[,]” which would be a “vain and useless act.”
‘The Oklahoma Supreme Court had to determine the time when the
plaintiffs-firefighters’ claim to recover pension benefits
accrued so as to initiate the running of the applicable
Limitations period. Id, at 620. The trial court had “ruled that

because of the existence of a trust-based relationship” between

7
 

FOR PUBLICATION***
the plaintiffs-firefighters and the retirement system, the

firefighters’ pension board had to “first unequivocably repudiate
the trust . . . to intiate the applicable (statute of)
Limitations period.” Id. at 622.

‘The Oklahoma Supreme Court reversed, holding that the
the

 

plaintiffs-firefighters’ claim was time-barred becau:
Oklahoma statutes “reveal{ed) no instance where the (bJoard [was]
empowered to or given authority to abrogate its statutorily-
prescribed fiduciary relationship with the pension funds.” Id.
According to the Oklahoma Supreme Court, “were [the bloard to do
80, it would be acting outside its statutory mandate(.)” Id.
Here, the opinion does not direct the ERS Board to act “outside
its statutory mandate[,]” id., but to conduct further proceedings
“in view of the ERS’s fiduciary duty to retirees[,]" slip op. at
24, which, as stated supra and in the opinion, slip op. at 20, is
in consonance with chapter 68. See e.g., HRS § 68-23.

‘The ERS Board further notes that “(iJn Washington, the
state retirement system is not even considered a trust, but a
state fund that is solely a creature of statute[,]” citing
Retired Public Emplovees Council of Washington v. Charles, 62
P.3d 470 (Wash. 2003). In Charles, organizations representing
retired public employees and teachers petitioned for a writ of
mandamus against the director of the Washington Department of
Retirement Systems. Id, at 474-75. The Washington Supreme Court

held that the director “may not be characterized as a trustee of
‘***F0R PUBLICATION*#*
OO
(the) funds” because the “funds [were] not truste[.]” Id. at
481. That is not the case here. As discussed supra, the ERS

 

Board, by express statutory mandate, is a “board of truste;
HRS § 88-23, and, therefore, the fact that another state does not

regard its retirement system director as a trustee is

inconsequential.
Finally, the ERS Board relies on Emplovees’ Retirement
System Board of Control v, Givhan, No. 2030075 (Ala. Civ. App.

oct. 8, 2004) (per curiam). The Board’s reliance is misplaced.
In Givhan, there was no allegation that the retirement forms used
by the Enployee Retirement System Board of Control of Alabama
were confusing or misleading. It was simply argued that the
retiree lacked capacity to make a proper election due to illness.
Also, Givhan does not make mention of any fiduciary obligations
of Board members or plan administrators. Again, the fact that
another state does not choose to impose a fiduciary obligation is
unpersuasive.
c.

In point (4), the ERS Board maintains that the
legislature could enact legislation similar to the provision in
ERISA that provides a cause of action for “breach of fiduciary

duty,” 29 U.S.C. § 1109," and that
"  29.v.8.c. § 1109(a) provides, in relevant part, that
[alay person who is a fiduciary with respect to a plan who
Breaches any of the responsibilities, obligations, or duties
Imposed upon fiduciaries by this subchapter shall’ be

personatly iiabie to make good to such plan any losses to
(contin...

19
‘*#*P0R PUBLICATION*#*

[elven under ERISA, “the majority of courte . . . have not
Ipposed upon an ERISA plan fidvclery the asty individually
to notify participants and/or beneficiaries of the specific
Tepact of the general terms of the plan upon them.” Maxa vs.
John Alden Lite Ing. coy, 972 F.24 980 (Bth Cir. 1992). See
also Stahl v, Tony's Butlding materiale, Inc., 875 F.2d 1408
{etn Cir. 1983)

In Maza, under the circumstances in that case, the

Eighth Circuit did

not construe ERISA or the regulations under it to require
Chat the appellee had a duty individually to warn, upon
their sixtyetizeh birthdays, each and all of the menbers of
the plane which st insured that their Benefits would be
Fedueed according to the plan's coordination of benefits
provision unless they enrolled in Medicare.

 

 

 

972 F.2d at 986. It was held that the appellee did not have the
duty to provide individualized notice, the rationale being that

fiduciaries should be able to rely upon the detailed and
lnifors guidance ERISA provides with regard to disclosure

fequirenents rather than bearing the practically impossible
borden of anticipating, and comprehensively addressing, the

individualized concerns of thousands of employe
Sepecisily without notice of those concerns.

 

 

Id, (emphasis in original). ‘The instant case, however, does not
concern individualized notification. The duty confirmed in the
opinion is the duty to provide clear and understandable
information on a standard application form and pamphlet that was
distributed to all retirees, not just Katsumi. Hence, Maxa is
not on point.

It should be noted that ERISA is a federal statutory

scheme involving statutes and regulations, the complexities of

 

(continued)
‘the plan resulting from each such breach, and to restore to
uch plan any profite of such fiduciary which have been made
through use of ascete of the plan by the fiduciary, and
Shall be subject to such other equitable or remedial relief
asthe court may Geem appropriate, including removal of such
fiauesary.

 

20
***FOR PUBLICATION*#*
eee
which, even the ERS Board acknowledges, “can be confusing.” For

instance, ERISA requires that a “summary plan description of any
employee benefit plan . . . be furnished to participants and
beneficiaries.” 29 U.S.C. § 1022. These summary plans must
comport with numerous standards under ERISA and its accompanying
regulations, Sea Stahl, 875 F.2d at 1406. Plans offered
through the ERS, however, are exenpt from ERISA as “governmental
plans.” see 29 U.S.C. § 1003(b) (2) ("The provisions of this
subchapter shall not apply to any employee benefit plan if. .
such plan is a governmental plan{.)" (Emphasis added.));!! 29
U.S.C. § 1321(b) (2) (excluding from ERISA coverage, plans that
are “established and maintained for its employees by the
Government of the United States, by the government of any State
or political subdivision thereof, or by any agency or
instrumentality of any of the foregoing” (emphasis added)); see.
also Hightower v, Texas Hosp. Ass'n, 65 F.3d 443, 447 (Sth Cir.
1995) (*[ERISA] was enacted to encourage the establishment and
growth of piivate pension plans and to protect the participants
in those plans.” (Emphasis added.)).

Nonetheless, the recognition of a duty to provide clear
information to ERS menbers is consistent with the mandates of
ERISA. In Stahl, the Ninth Circuit observed that a “summary plan
description ‘must not have the effect of misleading, misinforming

% A Sgovernmental plan” 1s defined as “a plan established or
naintained for ite employees by the Covernnent of the United States, by the

Governacst of any State or political subdivision thereof, or by any’ agency or
Ineteunentality of any of the foregoing.” 29 U.S.C. § 1002(32)-

 

 

2
 

FOR PUBLICATION*+*

 

or failing to inform participants and beneficiaries."" 875
F.2d at 1406 (quoting 29 Code of Federal Regulations § 2520.102-
2(b) (1987)) (brackets omitted). Similarly, in Swanson ws. UA.
Local 13 Pension Plan, 779 F. Supp. 690, 700 (W.D.N.¥. 1991), the
court held that “ERISA. . . impose(s] a duty upon fiduciaries to
fact in the interest of plan participants” and that “(t)hat duty
includes correctly and adequately informing participants about
their rights and obligations under the plan.” Assuming,
arquende, that ERISA cases provide an appropriate analogy for
Katoumi’s case, the objectively “misleading” nature of the ERS’s

retirement application and pamphlet would not constitute “correct

 

and adequate” information on Katsumi’s “rights and obligation:
Therefore, the opinion is not in conflict with the parallel
rationale in ERISA and this court did not “overlook” or
‘misapprehend” this matter.
b.

In point (5), the ERS Board contends that without a
request froma member, it is impossible for the ERS to meet the
needs of its approximately 93,000 menbers and that “without

notice of [Katsumi‘s] need for more information, or of his

"Stab does not support the ERS Board's position that no duty w
owed in Katsumivs case.” The summery plan at issue there was held to conta
Sperfectly understandable terms.” 875 F.28 at 1408. fone of the
court's atated bases for denying the plaintiff-retizee's claim that more
‘explanation was needed in th that a “summary plan
description does no good ual land digest it~" Id. at
1403. The plan already exceeded fifty pages. Id, Thus, requiring further
‘explanation would have contravened the federal Fegulations, which require that,
summary plans be “concise so that eaployees will yesd then-” [dA similar
page burden was not implicated in Kateumi's case. The focus of the opinion
Mas the objectively confusing and misleading language end format in the
Gpplication and pamphlet provided to

    

     

 
   

 

 

   

     

 
 

FOR PUBLICATION®**

particular circumstances, ERS could not have known that the
unambiguous choice he marked on his retirement option form was
misleading to him, when it had been satisfactorily chosen by
countless others.” The ERS Board’s contention that the ERS could
not have known that Katsumi did not understand the effect of his
election is unpersuasive inasmuch as the application form and
pamphlet it distributed to him and to all ERS members were
apparently misleading. Additionally, the statement that
“countless others” had chosen the “normal” option to their
satisfaction, assuming its relevance, is not substantiated with a
citation to the record and, therefore, amounts to conjecture.”
B.

In its final subsidiary argument, point (6), the ERS
Board argues that “the legislature has decided to make Hawaii's a
legislatively circumscribed benefits plan . . . [, meaning that
the legislature] grants the Board the discretion regarding how to
administer state ERS funds, but it vests the authority regarding
what benefits will be paid out, to whom, and when, with itself.”
Assuming, arguendo, that the ERS meets the definition of a

“defined benefit plan” as the ERS Board contends, the opinion

 

Finding no. 18 states as follow

 

Upon review of the ERS forme and documents completed
and submitted by Katauai Honda, it does not appear that he
had trouble understanding the forms or following
Instructions. There is no credible evidence in the record
that Kateum! Honda did not understand,

“th dts motion the ERS Board states that a
(contin.

B
‘+#*P0R PUBLICATION**

 

does not determine “what benefits will be paid out.” It
addresses the manner in which the ERS fulfills its obligation to
“administer” the ERS funds.

‘The duty of providing clear and accurate information in
the retirement application and pamphlet does not alter “what
benefits will be paid out” under the statutes, but goes to the
ERS's adninistration of such benefits. The ERS Board, in its
motion, acknowledges that “the ERS's primary duty to non-
contributory menbers is to ensure that the state funds dedicated
for their retirenents are properly managed and distributed.”
(Emphasis added.) The dissemination of misleading retirement
Literature frustrates the ERS meaber’s statutorily prescribed
right to “elect” a retirenent allowance option, HRS $ 88-263
(1993), and implicates the ERS’s management and distribution of
the funds.

The ERS Board argues that Katsumi “was not short-
changed” by pointing out that “he was a non-contributory Class
member . . . [who] did not contribute his own monies tovard his
retirement, though he did contribute his service to the state.”

It would seem self-evident that the distinction between

.omtinued)
(defined benefit plan entitles the menbers to a predetermined
Sistribution upon retirement and to an actuarially sound
plan to ensure thet the plen is adequately funded to mest
those distribution requirenents. it does not entitle then
to any use of the contributions other than to ensure the
above entitlenents are met

(Quoting Koster v. City of Davenport, Tova, 183 F.3d 762, 767 (Sth cir.
1999).

4
‘***FOR PUBLICATION***

———_— SSSSSSSSSSSSSSsSSSSSs
contributory and non-contributory members is irrelevant to the
question of whether the ERS fulfilled its obligation to properly
manage and administer the state funds inasmuch as the ERS’s duty
applies to all members.

‘Therefore, upon consideration of the subsidiary points,
the opinion did not “overlook” or “misapprehend” law or fact in
confirming the ERS’s “duty to provide its members . . . with
clear, understandable information concerning retirement
benefits.” Slip op. at 1.

wv.

Alternatively, the ERS Board requests that the opinion
be vacated and that the parties be given the opportunity to
“fully brief: (1) the issues raised in this court’s opinion; and
(2) the issue of whether [Helen's] death has rendered some or all
of the issues on appeal moot.” As to point (1), the opinion
already notes that “Helen did not raise” the erroneous findings
of fact before the court. Slip op. at 2, This matter, then, as
the ERS Board concedes, has “already been fully considered by
this court” and need not be reconsidered. Noreover, the
opinion expressly provides the statutory authority for remanding
‘the case to the court, and in turn, to the ERS. It states that
the majority is “exercis[ing] . . . (this court's] general
superintendence of the trial courts . . . and [its] power to make

% th the motion, the ERS Boerd states that it “does not raise the

matters addressed in the court's dissenting opinion because (the ERS Board),
While it fully agrees with che dissent, assunes thet those matters have
Biready been fully considered by this court

 

 

25
‘*#8POR PUBLICATION*#*

 

such orders and mandates as necessary for the promotion of
justice[.]” Slip op. at 2. Based upon the foregoing discussion
of the ERS Board’s arguments, further briefing on these matters

is unnecessary. The mootness issue has been addr

 

fed, as stated
supra.

v,
Accordingly, the ERS Board’s motion for reconsideration

is denied.

Russell Suzuki and Adina
Kobayashi Cunningham,
Deputy Attorneys General,

fe abpelioe:Agpelione,
on the motion. 47

eid A. Nakamura and Al dd ud Peraice

Rare f. Leong (oliver, Lau,

Tawhny Ogawa’ Nakanarals

for Appellant-Appellee,
in opposition.

Vsoctes Outre

26