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Oral Argument Befor the Hawaii Supreme Court

No. SCWC-30286 , Thursday, August 7, 2014, 10:00 a.m.

GARY W. RODRIGUES, Petitioner/Plaintiff-Appellant, vs. UNITED PUBLIC WORKERS, AFSCME LOCAL 646, AFL-CIO, Respondent/Defendant-Appellee.

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 Petitioner: 

Eric A. Seitz and Della A. Belatti

Attorneys for Respondent: 

James E.T. Koshiba and Charles A. Price

NOTE: Order accepting Application for Writ of Certiorari, filed 06/09/14.

COURT: MER, C.J.; PAN, SSM, RWP, & MDW, JJ.

 [ Listen to the entire audio recording in mp3 format ]

Brief Description:

Gary W. Rodrigues (“Rodrigues”) filed an application for writ of certiorari to review the Opinion of the Intermediate Court of Appeals (“ICA”) filed on March 13, 2014. Rodrigues’s application arises out of a judgment entered on March 31, 2008 against Rodrigues in the amount of $850,000.00 by the United States District Court for the District of Hawai`i (“District Court”) for breach of fiduciary duties under the Employment Retirement Income Security Act of 1974 (“ERISA”).

At all times relevant to this case, Rodrigues was the State Director of United Public Workers, AFSCME Local 646, AFL-CIO (“UPW”), a labor organization. In 1984, UPW established a mutual aid trust to provide supplemental hospitalization benefits for its members known as the UPW Local 636 Mutual Aid 501(c)(9) Trust (“Trust”). UPW agreed to provide administrative services to the Trust (“Agreement”). Under the terms of the Agreement, UPW, “through its State Director acting on its behalf,” agreed to administer the money payable to or by the Trust. Rodrigues provided administrative services to the Trust from 1984 until late 2002.

In June 1994, the trustees of the Trust (“Trustees”) authorized the investment of Trust funds to be made through the Hewitt Company (“Hewitt Co.”). As State Director, Rodrigues processed all investments of the Trust funds through Hewitt Co. on behalf of the Trust. Between late 1998 and late 1999, Hewitt Co. made a series of investments in Best Rescue Systems, Inc. (“Best Rescue”) totaling $1.1 million.

On December 10, 1999, UPW’s parent union, AFSCME, recommended that the Trust demand repayment of all of its investments in Best Rescue; accordingly, Rodrigues demanded payment on behalf of the Trust. Best Rescue did not immediately comply. In January 2000, UPW, through AFSCME, filed lawsuits against Best Rescue and Hewitt Co. on behalf of the Trust and its members to collect the funds invested in Best Rescue. Hewitt Co.’s principal, Albert Hewitt, was later convicted of criminal violations for his role in the Trust’s investments in Best Rescue. Best Rescue filed for bankruptcy.

In November 2002, for reasons unrelated to the Best Rescue investments, AFSCME suspended Rodrigues from his position as State Director and placed UPW under its administration. On October 31, 2003, UPW filed a complaint in the District Court Case, seeking recovery from Rodrigues of all of the Trust’s losses resulting from its investments in Best Rescue. Following a bench trial in March 2008, the U.S. District Court determined that Rodrigues was liable to the Trust in the amount of $850,000.00 plus costs and fees for negligent breach of fiduciary duties.

On December 9, 2008, Rodrigues filed a “Complaint for Indemnity” in the Circuit Court of the First Circuit of the State of Hawai#i (“circuit court”). Rodrigues alleged that his liability to the Trust arose solely from acts and/or omissions that he committed in his capacity as agent of UPW and/or were authorized and/or ratified by the trustees of the Trust and/or UPW. On that basis, Rodrigues claimed that he was entitled to indemnity from UPW for $850,000.00 plus his attorneys’ fees and costs incurred while defending the District Court Case.

The circuit court concluded that ERISA preempted Rodrigues’ indemnity claim because a breaching ERISA fiduciary does not have an equitable right of contribution. On appeal, the ICA concluded that ERISA did not preempt Rodrigues’s state indemnity claim because his state claim against UPW was based solely on theories of respondeat superior and UPW’s negligence against Rodrigues. The ICA held, therefore, that because Rodrigues’s state indemnity claim did not raise questions involving MAF’s administration and benefits, his claim was not preempted by ERISA. Notwithstanding, the ICA concluded that because the District Court case had clearly established that Rodrigues was held liable for his own actions, Rodrigues was not entitled to be indemnified for his negligent acts as a matter of law. Thus, the ICA affirmed the circuit court’s order.

Rodrigues presents the following question on certiorari: “Whether the ICA erred in determining under the circumstances Rodrigues’ negligence defeats his indemnification claim against his employer, Respondent/Appellee-Defendant United Public Workers, AFSCME Local 646, AFL-CIO (“UPW”) as a matter of law.”