State ex rel. Louie v. Haw. Gov't Emps. Ass'n

133 Hawai'i 385

328 P.3d 394

STATE of Hawai‘i, ex rel. David M. LOUIE, Attorney General, and Dean H. SEKI, Comptroller of the State of Hawai‘i, Petitioners/Plaintiffs–Appellants, Cross–Appellees,

v.HAWAII GOVERNMENT EMPLOYEES ASSOCIATION, AFSCME LOCAL NO. 152, AFL–CIO; United Public Workers, AFSCME Local No. 646, AFL–CIO; Royal State Corporation; Royal State National Insurance Company, Limited; the Royal Insurance Agency, Inc.; Voluntary Employees' Benefit Association of Hawaii; Management Applied Programming, Inc., Respondents/Defendants–Appellees, Cross–Appellants.

No. SCWC–29352.

Supreme Court of Hawai‘i.

Feb. 14, 2014.

Deirdre Marie–Iha, Honolulu, for petitioner.

Paul A. Schraff, Honolulu, for Royal respondent.

Charles A. Price, Honolulu, for respondent HGEA.

Adrian W. Rosehill, Honolulu, for respondent UPW.

RECKTENWALD, C.J., ACOBA, and McKENNA, JJ., WITH NAKAYAMA, J., dissenting, with whom POLLACK, J., joins.

Opinion of the Court by RECKTENWALD, C.J.

This case arises out of the Hawaii Public Employees Health Fund's "porting" program. Under the program, state and county employees could choose to enroll in health benefits and long-term care benefits plans offered by their respective employee unions, rather than Health Fund-sponsored plans. For employees who chose a union-sponsored plan, the Health Fund would transfer or "port" to the unions the government employers' contributions to the cost of providing insurance. See Hawai‘i Revised Statutes (HRS) §§ 87–4, 87–22.3, 87–22.5, 87–23 (repealed).¹ The instant action centers on the State's contention that public funds ported to certain unions exceeded the amounts allowed by law.²

Specifically, the Health Fund statutes provided that amounts ported to the unions would be either the public employer's contribution as determined in relevant collective bargaining agreements, or the "actual monthly cost of the coverage," whichever was less. HRS §§ 87–4, 87–22.3, 87–22.5, 87–23. The State alleged that public funds ported to the Hawai‘i Government Employees Association (HGEA) and the United Public Workers (UPW) exceeded the "actual [monthly] cost of coverage."³ The circuit court ultimately bifurcated the case, requiring the State to seek a declaratory judgment with regard to the interpretation of the statutory phrase "actual monthly cost of the coverage" before allowing litigation on the State's remaining claims. The State then argued that the phrase means

(1) premiums paid to insurance carriers in arm's length transactions, less any refunds, rate credits, and reimbursements, where the carrier is independent of HGEA and UPW, meaning, not controlled by, related to, or conspiring with leaders of HGEA and UPW to circumvent statutory limits on amounts ported by the Health Fund, or (2) allowable claims paid or incurred, plus reasonable administrative fees and profits where the carrier is not independent of HGEA and UPW.

The circuit court rejected the State's interpretation and concluded that the term means "the premium charged by and paid to the carrier." Because there was no dispute that the ported amount equaled the premium charged and paid, the circuit court's declaratory ruling essentially ended the State's case, and the circuit court entered judgment against the State.⁴

The State appealed, arguing, inter alia, that (1) the circuit court erred when it interpreted the phrase "actual monthly cost of the coverage" to mean "the premium charged by and paid to the carrier," and (2) the circuit court erred when it denied the State leave to file a second amended complaint and "rewrote" the State's complaint.

The Intermediate Court of Appeals affirmed the circuit court's judgment with respect to its interpretation of "actual monthly cost of the coverage." The ICA further determined, inter alia, that in light of its affirming the circuit court's interpretation, the issue of whether the circuit court erred when it denied the State leave to file a second amended complaint and "rewrote" the State's complaint was no longer justiciable. The ICA thus declined to reach that issue.

In its application for writ of certiorari, the State raises the following questions:

1. Did the [ICA] gravely err when it interpreted the phrase "actual monthly cost of the coverage" from Hawai‘i Revised Statutes (HRS) §§ 87–22.3, 87–22.5 and 87–23 to mean the premium set by an insurance carrier, even if the State of Hawaii alleges that (a) the insurance carriers had extraordinarily high gross profits, (b) the insurance carriers had extraordinarily high administrative fees, and (c) the amount charged for the premium was grossly inflated and did not reflect the "actual cost" of the coverage in a legitimate arm's-length business transaction?

2. Did the ICA gravely err when it failed to vacate the circuit court's orders denying the State leave to amend its complaint, when the circuit court (a) denied leave to amend even though the court had previously granted leave to file similar causes of action, (b) interpreted Hawaii Rules of Civil Procedure (HRCP) [Rule] 9 incorrectly to conclude that the State's civil conspiracy to defraud claim was insufficiently precise, (c) misused HRCP [Rule] 12(f) in order to edit the State's complaint itself, and (d) precluded the State from amending its definition of "actual cost of coverage" to make the definition consistent with the complaint as amended by the court?

(Emphasis in original).

We hold that the circuit court did not err in interpreting "actual monthly cost of the coverage" in chapter 87 to mean "the premium charged by and paid to the [insurance] carrier." We recognize that the State has raised serious and troubling allegations regarding improper financial dealings amongst the defendants. However, the State chose to tie its allegations to the statutes, and conceded at oral argument that its claims, including conspiracy to defraud the State, depended entirely on its interpretation of the statutory phrase "actual monthly cost of the coverage." We cannot rewrite the State's complaint to allege causes of action the State did not pursue. Nor can we rewrite the statutes to include prohibitions that the legislature never contemplated. Even if the State could have asserted a claim for conspiracy to defraud wholly apart from the provisions of chapter 87, it did not do so. The question here, as framed by the State, is a narrow one: do the factual allegations constitute a violation of the provisions of chapter 87? The answer to that question is no.

The State concedes that such a disposition would render moot its second argument regarding the pleadings process. Thus, we do not reach that issue. Accordingly, we affirm the judgment of the ICA.

I. Background

The following factual background is taken from the record on appeal.

A. Health Fund

In 1961, the Legislature established the Health Fund for the purpose of providing public employees and their dependents with a health benefits plan. 1961 Haw. Sess. Laws Act 146, § 1 at 191. The Health Fund was defined to consist of "contributions, interest, income, dividends, refunds, rate credits and other returns." Id. at 192. Act 146 required the State to make monthly contributions to the Health Fund for health benefits for employees and their dependents. Id. at 192–93. Employees also were required to make a monthly contribution to the Health Fund for "the difference between the monthly charge of the health benefits plan selected by the employee-beneficiary and the State's contribution to the fund." Id. at 193. The Health Fund board was authorized to contract with carriers to provide health benefits plans. Id. at 194. During the life of the Health Fund, which was replaced by the Hawaii Employer–Union Health Benefits Trust Fund (EUTF) on July 1, 2003, the Health Fund expanded the benefits provided to public employees to include plans such as prescription drug, vision, dental, and group life insurance plans. See 1965 Haw. Sess. Laws Act 235, § 2 at 393; 1967 Haw. Sess. Laws Act 110, § 3 at 101; 1985 Haw. Sess. Laws Act 304, §§ 1–2 at 816–17. Initially, the public employer's contribution was a specific dollar amount determined by statute. See, e.g., 1961 Haw. Sess. Laws Act 146, § 1 at 192. However, effective July 1, 1985, the legislature amended the Health Fund statute to require government employers to contribute amounts as set forth in "the applicable public sector collective bargaining agreement" or as established under HRS chapter 89C, which pertains to public officers and employees excluded from collective bargaining. 1984 Haw. Sess. Laws Act 254, §§ 4, 9 at 570–71, 573; HRS § 87–4(a) (1985 & 1993).

Beginning at various times during the existence of the Health Fund, the applicable statutes were amended to allow state and county employees to choose to enroll in union-sponsored insurance plans, in lieu of Health Fund-sponsored plans. See 1967 Haw. Sess. Laws Act 110, § 3, at 101; 1984 Haw. Sess. Laws Act 71, § 1, at 123. For employees who chose a union-sponsored plan, the Health Fund would pay or "port" to the unions the government employers' contributions to the cost of providing insurance. See HRS §§ 87–4, 87–22.3, 87–22.5, 87–23.

Under the statutory scheme at the time of the instant case, the Health Fund was to provide health benefits to public employees in the following manner:

(1) For those employee-beneficiaries who are not participating in a health benefits plan of an employee organization ..., the [Health Fund] shall establish health benefits plans and the requirements for eligibility under the health benefits plans; or

(2) For employee-beneficiaries who participate in the health benefits plan of an employee organization, the [Health Fund] shall pay a monthly contribution for each employee-beneficiary, in the amount provided in section 87–4(a),^[5]or the actual monthly cost of the coverage, whichever is less, towards the purchase of health benefits under the health benefits plan of an employee organization.

HRS § 87–22.3 (Supp.2002) (emphasis added).

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