Oral Argument Before the Intermediate Court of Appeals

No. CAAP-11-0000755, Wednesday, April 10, 2013, 9 a.m.

GAIL KONO and WRAY JOSE, each individually and on behalf of those persons similarily situated, and TERRIE SIMPSON, LIANE AUYONG-IMAMURA, PETER NAKASHIMA, CATHERINE KALEHUAWEHE, JOAN LEWIS, BEVERLYY CHIP, JUSTIN WONG, ROBERT GILMORE and GAYLE ENRIQUEZ, each in his or her official capacity as TRUSTEE of the HAWAIʻI STATE TEACHERS ASSOCIATION VOLUNTARY EMPLOYEES' BENEFICIARY TRUST, Plaintiffs-Appellees/Cross-Appellants, vs. NEIL ABERCROMBIE, Governor, State of Hawaiʻi, in his official capacity, STATE OF HAWAI`I, DOES 1-10, Defendants-Appellants/Cross-Appellees.

The above-captioned case has been set for argument on the merits at:

Supreme Court Courtroom
Ali`iolani Hale, 2nd Floor
417 South King Street
Honolulu, HI 96813

Attorneys for Defendants-Appellants/Cross-Appellees:

Brian P. Aburano, Diane Erickson, and William J. Wynhoff, Deputy Attorneys General

Attorneys for Plaintiffs-Appellees/Cross-Appellants:

Paul Alston, David A. Nakashima, and John Rhee of Alston Hunt Floyd & Ing

COURT: Foley, Acting CJ; Fujise and Leonard, JJ.

[ Listen to the entire audio recording in mp3 format ]

Brief Description:

This class action litigation involves a plaintiff class generally comprised of approximately 15,200 school teachers who participated in health benefits plans administered by the Voluntary Employees' Beneficiary Association Trust (VEBA Trust). Plaintiffs-Appellees/Cross-Appellants (Plaintiffs) filed a complaint alleging claims for violations of Art. XVI, § 2 of the Hawaiʻi Constitution, breach of contract, unjust enrichment, and injunctive and declaratory relief. Plaintiffs' claims were based on the legislative enactment transferring the teachers' health benefits plans from the VEBA Trust to the Employer-Union Health Benefits Trust Fund, and on the State of Hawaiʻi's (State) taking of surplus funds from the VEBA Trust.

The Circuit Court of the First Circuit (circuit court) entered its "Amended Final Judgment Partly in Favor of Plaintiffs and Partly in Favor of Defendants" (Final Judgment) with the following determinations:

(a) Act 106, Session Laws of Hawaiʻi 2010 ("Act 106"), does not violate Article XVI, Section 2 of the Hawaiʻi Constitution ("Art XVI, § 2");

(b) The transfer of active and retired teachers who participated in the health benefits plans of the Hawai`i State Teachers Association Voluntary Employees' Beneficiary Association Trust ("VEBA members") to the health benefits plans of the Hawai`i Employer-Union Health Benefits Trust Fund ("EUTF"), effective January 1, 2011 pursuant to Act 106, does not violate Art. XVI, § 2 nor does it breach any contract between VEBA members and the State of Hawaiʻi ("State");

(c) Former VEBA members who transfer to the EUTF pursuant to Act 106 are entitled to maintain the same standard of coverage benefits in their EUTF health benefits plans;

(d) To the extent that the surplus funds that the VEBA Trust returned to the State were part of accrued benefits of the VEBA members who paid into the surplus, such funds shall be used by the State to ensure that VEBA members can maintain their standard of coverage benefits, as provided in this Final Judgment.

Pursuant to the above determinations, the circuit court entered judgment partly in favor of Plaintiffs and partly in favor of Defendants-Appellants/Cross-Appellees (Defendants) as to all counts of Plaintiffs' complaint.

On appeal, Defendants contend the circuit court erred:

(1) in holding that "the teachers in the VEBA Trust have constitutionally protected accrued benefits based on their past service" and are entitled to maintain the same standard of coverage benefits in their EUTF health benefits plans;

(2) in ordering the VEBA Trust surplus funds be used to ensure that the Teachers maintain the same standard of coverage benefits; and

(3) in entering its orders denying Defendants' motion for judgment on the pleadings and motion for award of attorney's fees.

On cross-appeal, Plaintiffs contend the circuit court erred:

(1) in determining that Act 245 and its subsequent amendments and the State's taking of the VEBA Trust surplus did not violate Art. XVI, § 2 of the Hawaiʻi Constitution;

(2) in determining that Act 245 and the taking of the surplus did not violate the teachers' contractual rights;

(3) in entering its orders denying Plaintiffs' motions for a preliminary injunction, for leave to file an amended complaint, and for attorney's fees and costs; and

(4) in issuing the Final Judgment after denying the State's motion for judgment on the pleadings.

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