Opinion ID: 2518920
Heading Depth: 3
Heading Rank: 1

Heading: Whether the EUTF Trustees owe common law fiduciary duties to Plaintiffs

Text: Although HRS chapter 87A utilizes general trust terminology, it is clear that the EUTF is not a typical common law trust such that the Trustees are subject to all of the common law fiduciary duties. For example, under the common law, a trustee owes a duty of loyalty to the beneficiaries, i.e., to administer the trust solely in the interest of the beneficiaries. See Restatement (Third) of Trusts: Prudent Investor Rule § 170(1) (The trustee is under a duty to administer the trust solely in the interest of the beneficiaries.). In the case of the EUTF, however, the design and establishment of health benefits plans is not to be done solely in the interests of the employee-beneficiaries. Rather, according to HRS § 87A-5 and-15, supra notes 2 & 4, half of the EUTF trustees represent the public employers, and the health benefits plans are to be provided at a cost affordable to both the public employers and the public employees. Further, the legislative history of chapter 87A states that one of the main purposes of creating the EUTF was to establish a single health benefits delivery system to make the cost of insurance affordable for the State. Conf. Comm. Rep. No. 124, in 2001 House Journal, at 1097-98. Thus, HRS chapter 87A's use of general trust language does not impose upon the EUTF Trustees all of the common law fiduciary duties. This conclusion is supported by the Court of Appeals of the Ninth Circuit's decision in Price v. Hawai`i, 921 F.2d 950, 955-56 (9th Cir.1990). Therein, the Ninth Circuit held that the use of the term public trust in section 5(f) of the Hawai`i Admission Act did not subject the State to all aspects of common law trust duties. The court reasoned: [N]othing in that statement indicates that the parties to the compact agreed that all provisions of the common law of trusts would manacle the State as it attempted to deal with the vast quantity of land conveyed to it for the rather broad, although not all-encompassing, list of public purposes set forth in section 5(f). 921 F.2d at 955. Here, as in Price, the use of trust terminology does not subject the EUTF Trustees to all provisions of the common law of trusts. Furthermore, as the Restatement (Third) of Trusts § 1, cmt. a(1) states: Several bodies of state and federal legislation dealing with various types of charitable, public, or pension (governmental and private) funds expressly or impliedly incorporate rules of the general trust law that is the subject of this Restatement. See Reporter's Notes. See also § 90, Comment a (Restatement Third, Trusts (Prudent Investor Rule) § 227, Comment a); and Reporter's General Notes to § 90 (id. § 227). See also Uniform Management of Institutional Funds Act, briefly discussed in the Reporter's Notes on § 67. The principles of this Restatement are generally appropriate to those statutory bodies of rules, both by analogy and insofar as those rules expressly or impliedly incorporate general principles of trust law. Specific provisions and special circumstances or relationships involved in the application of those statutory rules, however, often present fundamentally different considerations, thus expressly or impliedly calling for application of different rules that are not within the scope of this Restatement except as similar circumstances are taken into account in the elaboration of general trust-law principles. (Emphasis added.) It is therefore apparent that, rather than relying entirely on the common law of trusts, we must take into consideration the [s]pecific provisions and special circumstances of the EUTF, as expressed in the statutory language of HRS chapter 87A and its legislative history, in determining how to review the Trustees' decision to adopt a two-tier rate structure.