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Boyd v. Hawaii State Ethics Commission

Supreme Court of Hawaii

July 19, 2016

WILLIAM ERIC BOYD, Petitioner/Appellant/Appellee/Cross-Appellant
v.
HAWAII STATE ETHICS COMMISSION, STATE OF HAWAI'I, Respondent/Appellee/Appellant/Cross-Appellee.

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-14-0000352; CIV. NO. 13-1-115)

          Ted H. S. Hong for petitioner

          Kimberly Tsumoto Guidry For respondent

          RECKTENWALD, C.J., McKENNA, POLLACK, AND WILSON, JJ., AND CIRCUIT COURT JUDGE CHANG, IN PLACE OF NAKAYAMA, J., RECUSED

          OPINION

          POLLACK, J.

         This case addresses whether the Hawai'i State Ethics Commission (Commission) had authority to adjudicate proceedings against a charter school employee for conduct that occurred in 2006 and 2007 involving alleged conflict of interest violations of the code of ethics contained in Chapter 84 of the Hawai'i Revised Statutes (HRS). We conclude that HRS § 84-14 (1993), prescribing a code of conduct related to conflicts of interests for State employees, and HRS Chapter 302B (Supp. 2006 & 2007) (repealed 2012), encompassing comprehensive provisions that provided for charter schools to establish conflict of interest policies and procedures, resulted in conflicting statutory regimes for charter school employees as to standards of conduct involving conflicts of interests. In light of the inconsistency between these State laws, we hold that, in accordance with HRS § 302B-9(a) (Supp. 2006 & 2007) (repealed 2012), charter school employees were exempt from HRS § 84-14 at the relevant time period in this case. Accordingly, the Commission did not have the authority to adjudicate proceedings against William Boyd, a charter school employee, for alleged violations of HRS § 84-14 that occurred in 2006 and 2007. We therefore vacate the judgments of the Intermediate Court of Appeals (ICA) and the Circuit Court of the Third Circuit (circuit court) and the order of the Commission that sustained the violations against Boyd, and we remand the case to the Commission with instructions to dismiss the case.

         I. BACKGROUND

         At the time of the alleged ethics violations in this case, Connections New Century Public Charter School (Connections) was governed by HRS Chapter 302B, which set forth comprehensive legislation authorizing flexibility and independent authority to charter schools in implementing alternative frameworks with respect to personnel management and the day-to-day functioning of a charter school.[1] See HRS § 302B-1 (Supp. 2006 & 2007) (repealed 2012). Charter schools, such as Connections, operated independently and separately from public schools under Chapter 302B but were linked to the State Department of Education and Board of Education primarily for administrative purposes. See, e.g., HRS § 302B-8 (Supp. 2006 & 2007) (repealed 2012) (stating the charter school administrative office shall be attached to the Department of Education "for administrative purposes only"); HRS § 302B-15 (Supp. 2006 & 2007) (repealed 2012) (setting forth the responsibilities of the Department of Education with respect to charter schools and special education services at charter schools).

         Connections' Local School Board, comprised mainly of community representatives, served as Connections' centralized governing authority responsible for the administration of the school. See HRS § 302B-7(a), (c) (Supp. 2006 & 2007) (repealed 2012). The Local School Board was in charge of financial oversight and decision-making regarding State general funds and federal funds allocated to the school as well as the hiring and firing of charter school employees. See id. According to Connections' Principal John Thatcher, the Local School Board essentially directed him as to how he should manage the school.

         A. Connections' Internal Policies and Procedures

         During the pertinent time period in this case, Connections, with the assistance of its hired auditors, developed and followed its own internal checks-and-balances procedures with respect to procuring school supplies, materials, and other equipment. The purchasing procedure incorporated the use of a purchase order form that Connections' administrators had developed. The purchase order form required the following information: (1) the name and title of the individual making the request (requestor); (2) the name, address, and telephone number of the individual or entity from whom the materials could be purchased (vendor); (3) the school materials desired, including the quantity and pricing; and (4) the name(s) and title (s) of the individual(s) approving the request.

         Any employee of Connections could make a request by listing the vendor's information on the purchasing form and then submitting the form to an authorized school official for approval. The approval process included reviewing the information on the form, checking the school's inventory to ensure that the school did not have the requested materials, and checking with vendors to find the best prices for the requested materials. Principal Thatcher was required to approve all purchase requests. When Principal Thatcher was not available to give his approval, William Boyd or Sandra Kelley, as administrative officials at Connections, were authorized to preliminarily approve purchase orders in order to enable expedited purchases, but all preliminary approvals were subject to final approval by Principal Thatcher. If the purchase involved Title 1 funds, the purchase also required review and approval by the Title 1 Coordinator.[2] Additionally, Principal Thatcher explained that the Local School Board, through its finance committee, could review his final approval of the purchase order requests.

         As an employee of Connections, Boyd was also authorized to submit purchase order requests. On several occasions during the 2006-2007 school year, Boyd prepared, signed as requestor, or preliminarily approved various purchase order forms for requested school materials. With respect to a handful of forms, Boyd listed his wife, Erika Boyd (Mrs. Boyd), as the requestor and/or the vendor. On two of the forms, Principal Thatcher approved the purchase order by signing his name under the heading "Approved." On all the other forms, Boyd preliminarily approved the request, usually at the direction of Principal Thatcher, and then Principal Thatcher later reviewed and authorized the order by initialing the form. For some of the purchase order forms in which Mrs. Boyd was listed as the vendor, a Connections' teacher was the requestor, and Boyd preliminarily approved the order. The school materials listed on the forms at issue were sold to Connections through Mrs. Boyd and fulfilled by an Amway distributorship co-owned by Boyd and his wife (Amway Business).[3]

         When asked whether it was a concern that Mrs. Boyd was a requestor and Boyd was preliminarily signing off on purchase order forms, Principal Thatcher explained that this situation was quite rare and that it would have been a concern if it had been a common practice. Principal Thatcher stated that the original charter school statute required that the Board of Education audit Connections every year, which it failed to do. Thus, beginning in 2006, Connections hired its own auditors, who conducted audits and made recommendations to refine the school's checks-and-balances procedures, including the school's purchase order procedures.

         Principal Thatcher explained that he sought to instill in Connections' employees that the school needed to get everything at the lowest cost possible. He related that Boyd did a lot of research on the availability of items and vendors and stated that Boyd was very diligent about following the practice of purchasing necessary items at the lowest price possible. Boyd in large part secured his position as Administrative Assistant at Connections because he always followed Principal Thatcher's directions and methods. Principal Thatcher insisted that he could have approved the purchases of the school materials from other vendors, rather than from Mrs. Boyd, and that it was his prerogative to make that decision if the prices had been cheaper.

         In 2007, before the start of the school semester, Connections learned of a sudden price increase for its high school lunch services, and it had approximately three weeks to enter into a temporary replacement food services contract. Connections sought vendors, but Principal Thatcher explained that it was difficult to find affordable vendors on short notice. Consequently, Connections contracted with Boyd Enterprises, a sole proprietorship co-owned by Boyd and his wife, to provide school lunches as Mrs. Boyd had the only competing bid with the Department of Education that would save Connections money.[4]

         As part of the procedure for obtaining payment for the school lunches, Boyd Enterprises was required to submit a duly signed and certified Food Service Certificate, or invoice, reflecting the number of school lunches provided and the total amount owed. Principal Thatcher approved payment for the Food Service Certificates, and in his absence, Kelley would do so. Boyd apparently did not have authority to approve the Food Service Certificates and did not participate in the approval procedures as a school official.

         From January 25, 2007 to June 21, 2007, Boyd, as the Food Services Manager for Boyd Enterprises, submitted eleven Food Service Certificates to Connections and certified that the number of school lunches stated on the certificates represented the actual number of lunches provided. Kelley signed all the Food Service Certificates, and Principal Thatcher approved each of the payments to Boyd Enterprises. Principal Thatcher indicated that, at the time Connections had contracted with Mrs. Boyd, it was not a concern that Connections was paying Boyd Enterprises in which Boyd was the Food Services Manager. He explained that "we did not see it as a problem" but, after a year or so, in 2008, the hired "auditors advised [Connections] that it would be better if [Boyd] was not involved with the food service program at all, and [Connections] followed the advice of the auditors."

         B. Commission Proceedings

         On October 20, 2010, the Commission formally issued a charge against Boyd based on twenty-six counts of violating HRS § 84-14(a) and (d) (1993), involving the purchase of school supplies and lunch services that had occurred approximately three years earlier. Boyd filed an answer to the Commission's charge and requested a formal, contested, open hearing. Nearly seventeen months later, on April 18, 2012, the Commission issued its further statement of alleged violation that charged Boyd with nine counts of violating HRS § 84-14 (a), [5] for requesting and approving the purchase of school materials from Amway Business, and eleven counts of violating HRS § 84-14(d), [6] for assisting Boyd Enterprises in transactions to provide lunches to Connections.

         Boyd filed an answer to the charge and further statement of alleged violation. He also filed a motion to dismiss based on the Commission's lack of jurisdiction, maintaining that he was not an employee of the State subject to the code of ethics contained in HRS Chapter 84.[7] Boyd additionally contended that he was exempt from Chapter 84 because the legislature intended that local school boards develop and adopt their own ethics code. Boyd argued that he was accountable for his actions to Connections' Local School Board, an autonomous entity under Chapter 302B, and not to the Commission under Chapter 84.

         Principal Thatcher submitted a signed, sworn declaration to the Commission, which quoted the portion of Connections' Detailed Implementation Plan that stated as follows:

The employment, appointment, promotion, transfer, demotion, discharge, and job descriptions of all officers and employees of or under the jurisdiction of the New Century Charter School shall be determined by the New Century Charter School and applicable personnel laws and collective bargaining agreements.
Except as previously stated, the Board of Education or the Superintendent of Education shall not have the power to supervise or control the New Century Charter School in the exercise of its functions, duties and powers.

         This portion of the Detailed Implementation Plan described the powers, duties, and responsibilities of Connections and its Local School Board. Additionally, the Detailed Implementation Plan indicated that the Director of Operations of the Local School Board had direct authority over operations and business services, fiscal management and personnel services, and purchasing and audit services. The Commission in response to the motion to dismiss filed a motion for determination that Boyd was subject to the Commission's jurisdiction. The Commission deferred its decision as to whether Boyd was subject to its jurisdiction until the date of the contested case hearing.

         At the beginning of the contested case hearing, the Commission granted the motion for determination and denied Boyd's motion to dismiss due to lack of jurisdiction, orally ruling that Boyd was an employee of the State subject to the code of ethics contained in Chapter 84 and to the Commission's jurisdiction. During the hearing, in addition to the circumstances recounted above, Boyd testified that he did not receive any notification, training, or written information from the Commission that the code of ethics applied to him. Boyd also stated that he had done everything within his power to save Connections money. No evidence was presented that Amway Business or Boyd Enterprises overcharged Connections or that the school materials and lunches supplied to Connections were not provided at the best available price.

         Following the hearing, the Commission rendered factual findings, which included the following: (1) Connections was a public charter school created pursuant to statute; (2) Connections utilized a purchasing procedure that incorporated the use of a purchase order form it had developed; (3) as part of the purchasing procedure, several administrators were required to review the request, and Principal Thatcher retained final approval authority; and (4) Boyd, an Administrative Assistant at Connections, initially approved several purchase orders, which were subject to final approval by Principal Thatcher. The Commission also found that Principal Thatcher and Kelley had the sole authority to approve payments for the Food Service Certificates, which reflected the number of school lunches provided, and that Principal Thatcher approved payments to Boyd Enterprises for all the Food Service Certificates submitted.

         The Commission determined that the code of ethics applied to all State employees, except judges and justices, [8] and that Connections was a State agency as defined in HRS § 84-3 (1993).[9] The Commission thus concluded that, as an employee of Connections, a State agency, Boyd was an "employee" as defined in HRS § 84-3 and was therefore subject to the provisions set forth in Chapter 84.[10] Consequently, in its February 8, 2013 "Findings of Fact, Conclusions of Law, and Decision and Order" (Decision and Order), the Commission concluded that Boyd had committed nine violations of HRS § 84-14(a) (Counts 1-9) and eleven violations of HRS § ...


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