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Stout v. Board of Trustees of Employees' Retirement System

Supreme Court of Hawaii

July 10, 2017

ROSEMARY H. STOUT, Appellant-Appellant,
v.
BOARD OF TRUSTEES OF THE EMPLOYEES' RETIREMENT SYSTEM, STATE OF HAWAI'I, Appellee-Appellee.

         APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CAAP-15-0000582; CIV. NO. 14-1-2428-11)

          John C. McLaren for petitioner.

          Brian Aburano for respondent.

          RECKTENWALD, C.J., McKENNA, POLLACK, WILSON, JJ., WITH NAKAYAMA, J., DISSENTING

          OPINION

          McKENNA, J.

         I. Introduction

         This case concerns whether a public school teacher who is a member of the Employees' Retirement System of the State of Hawai'i ("ERS") through her regular full-time position is eligible for "service-connected disability retirement" benefits under HRS § 88-79 (Supp. 2004) after being shot in the chest while serving as a public summer school teacher, which is a position that, when held on its own, does not provide ERS membership eligibility. Rosemary H. Stout ("Stout"), a regular school year teacher employed by the State of Hawai'i Department of Education ("DOE"), applied for benefits under HRS § 88-79 on August 3, 2004 based on injuries suffered as a result of a June 30, 1988 shooting. Despite a determination by the Medical Board to the ERS ("Medical Board") that Stout was incapacitated from teaching due to the shooting, on October 27, 2014, the Board of Trustees of the ERS ("ERS Board") issued a Final Decision denying Stout's application on the threshold basis that although she was an ERS member, she was not entitled to "service-connected disability retirement" under HRS § 88-79 because the shooting occurred while she served as a part-time summer school teacher, which was not employment that qualified for ERS membership.

         On July 28, 2015, the Circuit Court of the First Circuit ("circuit court")[1] affirmed the ERS Board and entered Final Judgment. Stout timely appealed to the Intermediate Court of Appeals ("ICA"). This court accepted a transfer of this case from the ICA.

         We hold that Stout is eligible for "service-connected disability retirement" under applicable law. HRS § 88-79 provides that an ERS member may be retired by the ERS for "service-connected disability retirement" if she is "permanently incapacitated for duty as the natural and proximate result of an accident occurring while in the actual performance of duty at some definite time and place . . . ." The issue is whether Stout's injury is "service-connected." HRS § 88-21 (Supp. 2004) defines "service" to include any "service as an employee paid by the State or county, " and contains additional language indicating that "connected" service includes non-ERS-membership State or county service, as long as the member makes ERS contributions during the time of such non-ERS-membership State or county service. Stout was making ERS contributions on June 30, 1988. HRS § 88-21 also separately defines "membership service" as "all service rendered by a member for which the member had made the required contributions to the system." Therefore, although Stout's summer school employment at 'Aiea High School was not "membership service, " it was nevertheless "service, " and HRS § 88-79 provides for "service-connected disability retirement, " not "membership service-connected disability retirement." Accordingly, under HRS § 88-79, Stout is eligible to apply for "service-connected disability benefits." This conclusion is also supported by legislative history and the statutory scheme of HRS Chapter 88.

         We therefore vacate the judgment of the circuit court and remand this case to the ERS Board for further proceedings consistent with this opinion.

         II. Background

         A. Stout's Employment and ERS Membership History

         Stout first began working for the DOE in the early 1980s, teaching at various locations including Waialua Intermediate and High School, 'Aiea Intermediate School, and on Kaua'i. Stout became tenured in 1985. During the 1987 to 1988 academic year, Stout taught at Radford High School ("Radford"). During the summers of 1985 through 1988, the DOE offered a summer school program to students at 'Aiea High School ("'Aiea") and employed Stout each summer to teach an English class there.

         By 1984, Stout was a member of ERS. She contributed to the ERS fund year-round through deductions taken from her academic-year salary, which was paid by the DOE over the course of twelve months. Stout's summer school earnings were paid by the DOE based on an hourly rate by way of separate checks. No deductions from summer school earnings were made for ERS contributions.

         B. Stout's Injury: the June 30, 1988 Shooting

         Stout was shot on June 30, 1988 by Romel Castro ("Castro") - a then-eighteen-year-old student of Stout's - while she was teaching summer school at 'Aiea. See Tradewind Ins. Co. v. Stout, 85 Hawai'i 177, 181, 938 P.2d 1196, 1200 (App. 1997) (stating facts elicited at Castro's criminal trial). On February 2, 1990, Castro was convicted of attempted second degree murder and a firearms violation. See id. He was sentenced to life imprisonment with the possibility of parole. See id.

         C. Application for Benefits to the ERS Board

         Stout filed an "Application for Disability Retirement Contributory Plan" ("Application") with the ERS Board on August 3, 2004, requesting "service-connected disability retirement." She indicated that the accident which caused her disability was "shot by student in chest" on June 30, 1988 at 'Aiea High School.

         On October 4, 2004, an "Employer's Statement Concerning Service-connected Disability" was completed by the DOE. Specifically, the DOE identified itself as, "Department of Education - Radford High School, " and declared that it did not employ Stout on the date of the shooting, and that it lacked records of any accident. Despite this, the "Department of Education - Radford High School" stated the place of Stout's accident as "Aiea High School - Summer Session, " Stout's work performed as "language arts teacher - Summer Session at Aiea High School, " and that Stout was”'on duty' at the time of the accident ... at Aiea High School."

         The Medical Board of the ERS interviewed Stout and reviewed her Application and various employment and medical records, including the October 2004 statement from "Department of Education - Radford High School." It issued a report dated February 17, 2006, finding that Stout was occupationally incapacitated, likely permanently, due to psychiatric conditions which precluded a return to work as a teacher, but that evidence did not show that she was incapacitated for gainful employment in other occupations. The Medical Board further found the June 30, 1998 shooting to have been an "accident" that was the "natural and proximate cause" of Stout's incapacitation, and that the accident occurred when Stout was "in the actual performance of duty at some definite time and place." The Medical Board determined that Stout's incapacity was not the result of her "willful negligence, " which would preclude recovery under HRS § 88-79. The Medical Board ultimately recommended that Stout be granted "Service-Connected Occupational Disability Retirement, "[2] but that her request for "Service-Connected Total Disability Retirement" be denied.

         HRS § 88-79 permits the ERS Board to accept as conclusive the Medical Board's finding that Stout's "disability [wa]s the result of an accident occurring while in the actual performance of duty at some definite time and place and that the disability was not the result of wilful negligence on [Stout's] part, " and approve the member's eligibility for a service-connected disability retirement benefit. HRS § 88-79(d) (2).[3] Here, however, after reviewing the Medical Board's report, the ERS Board issued an April 19, 2006 "Order Remanding Report to Medical Board, " indicating that in its view, Stout was not entitled to benefits:

[S]ection 88-42.5, [4] Hawaii Revises [sic] Statutes, and section 6-21-14(2), [5] Hawaii Administrative Rules, exclude teaching summer school from a public school teacher's Employees' Retirement System membership. An accident resulting in injury to a public school teacher while the teacher is teaching summer school is therefore not "an accident occurring while in the actual performance of duty" under sections 88-77 and 88-79, Hawaii Revised Statutes.

         On this basis, the ERS Board remanded the report to the Medical Board for further proceedings.

         The chair of the Medical Board, Patricia L. Chinn, M.D., J.D. ("Dr. Chinn"), issued a memorandum dated May 19, 2006, acknowledging the ERS Board's Order Remanding Report to Medical Board. Dr. Chinn continued, however:

The Medical Board respectfully declines to revise its recommendation. The Medical Board does not believe it has sufficient information concerning this Member's employment status and is unfamiliar with and has no expertise on the requirements concerning membership. It also appears to the Medical Board that this case involves an interpretation of the statute and rule regarding the exclusion from membership and the performance of duty, an interpretation that is best left to the Trustees.

         Dr. Chinn issued a follow-up memorandum on July 15, 2007 adding: "The only possibility of granting the Member benefits [on the basis of the June 30 shooting] is if she is considered a member for the purposes of qualifying for retirement benefits but not for the purpose of service credit while teaching summer school. We believe this is a matter for the Board to decide."

         An ERS administrator, David Shimabukuro, subsequently issued an October 9, 2007 memo to the ERS Board that echoed the ERS Board's interpretation of HRS § 88-42.5 and HAR § 6-21-14(2). He concluded:

[ERS] Staff therefore believes that services rendered in a position that is excluded from ERS membership should not be considered "an accident occurring while in the actual performance of duty" for the purposes of determining an individual's eligibility for accidental disability benefits and recommends that the Board deny Ms. Stout's applications for service-connected occupational and total disability retirement benefits.

         Subsequently, a letter was issued to Stout on October 11, 2007 indicating the ERS Board's preliminary determination to deny her application for both service-connected occupational disability retirement benefits and service-connected total disability retirement benefits. The letter acknowledged that the ERS Board proposed to approve and accept the certifications, findings, and recommendations contained in the Report, except for the Medical Board's finding that Stout's disability was the "result of an accident occurring while in the actual performance of duty." The ERS Board opined that an accident incurred by a public school teacher while teaching summer school is not "an accident occurring while in the actual performance of . . . duty."

         On December 7, 2007, Stout timely filed an appeal of the ERS Board's proposed decision to deny both service-connected occupational disability retirement benefits and service-connected total disability retirement benefits.

         D. Administrative Proceedings Regarding Cross-motions for Summary Judgment

         On February 25, 2009, Stout's appeal was assigned to a hearing officer. The parties agreed to address the threshold issue of whether Stout was eligible to apply for service-connected disability retirement, given that she was shot while teaching summer school for the DOE. Cross-motions for summary judgment were filed. A hearing on the motions was held on January 10, 2013.

         On March 6, 2013, the hearing officer issued a Recommended Decision, determining that the main issue on appeal "is simply whether the summer school program at Aiea High School on June 30, 1988 was a covered employment under the Employees' Retirement System[.]" The hearing officer quoted the relevant statute that provides service-connected disability retirement, HRS § 88-79, [6] and concluded: "It goes without saying that this requirement[, "while in the actual performance of duty, "] refers to employment that made contributions to the ERS in order to establish ERS coverage." Because Stout did not contribute any of her summer school earnings to the ERS (nor did the DOE contribute to the ERS based on Stout's summer school earnings), the hearing officer concluded that she did not satisfy the "while in the actual performance of duty" requirement. The hearing officer also noted that Stout was not "a member of ERS when she was injured on June 30, 1988 while a part-time summer school teacher" as "she was excluded from membership under HAR § 6-21-14." Lastly, the hearing officer commented that he agreed with the ERS Board's argument that "it would be unfair to all other members of the ERS to have retirement benefits taken by [Stout] out of ERS funds when neither the DOE nor [Stout] made the requisite contributions for such retirement benefits from her part-time temporary summer school earnings."

         On July 15, 2013, the ERS Board issued a Proposed Decision, which adopted the Recommended Decision and incorporated the hearing officer's findings of fact and conclusions of law as its proposed decision, and denied Stout's application for service-connected disability retirement benefits.

         Stout timely filed exceptions to the proposed decision. She took issue with the hearing officer's failure to explain why the statement by "Department of Education - Radford High School" that Stout was "'on duty' at the time of the accident" was "unimportant." Stout also pointed out the hearing officer failed to indicate whether the standard of review for summary judgment motions were followed, did not discuss several cases she had cited to in her briefs such as Hua v. Board of Trustees of the Employees' Retirement System, State of Hawai'i, 112 Hawai'i 292, 145 P.3d 835 (App. 2006), and Kikuta v. Board of Trustees of the Employees' Retirement System, State of Hawai'i, 66 Haw. Ill. 657 P.2d 1030 (1983), and inappropriately relied on declarations submitted by the State.

         The ERS Board held a hearing on September 23, 2014. After the parties presented their arguments, the ERS Board elicited the following information from counsel: summer school teachers generally are DOE teachers because most DOE teachers are certified and there is a preference that summer school teachers have teacher's certificates; summer school employment is not required of tenured DOE teachers and is voluntary; and funding for summer school is paid out of a separate fund composed of student summer school tuition.

         At the hearing, one of the board members suggested that had Stout been shot during school hours during the academic year, there would have been no issue as to whether or not Stout's injury was a service-connected disability. Another board member, who worked for the DOE, stated that she "d[id] know that summer school needs to be self supporting [sic]" based on student tuition. That board member also stated: "I'm really clear ... in the fact that I know that teachers, if they choose to teach summer school, they're just at risk because they're not covered . . . even though they're DOE employees." She went on to express concern that the record lacked much information regarding Stout's incapacity, and suggested that had that been looked at more closely in the case, "it would have made things much easier for this board to be able to look at something like granting." Stout's counsel then clarified that based on an agreement with opposing counsel and the hearing officer, the record was focused on the threshold issue of whether Stout was legally entitled to apply for benefits, and not on Stout's medical condition.

         On October 27, 2014, the ERS Board issued its Final Decision. The ERS Board explained that the "threshold issue in this appeal ... is whether an accident that occurs in a non-member position can be the basis for service-connected disability retirement benefits." It explained, therefore, that Hua and Kikuta were inapplicable to the case because they did not concern this issue. The ERS Board acknowledged that Stout was granted workers' compensation benefits, including ERS credits, based on the June 30, 1988 shooting; however, it stated: "The ERS's uniform practical construction of the statutes and rules[, e.g., HRS §§ 88-42.5, 88-43, 88-77, 88-79; HAR § 6-21-14, ] involved in this appeal has been that ERS members are not entitled to service-connected disability retirement based on accidents that occur when they are performing duties in non-membership employment positions." Accordingly, the ERS Board affirmed the Proposed Decision and adopted the Recommended Decision, and therefore denied Stout's applications for service-connected occupational disability retirement benefits and service-connected total disability retirement benefits.

         E. Circuit Court Proceedings

         Stout timely filed a notice of appeal to the circuit court. Oral argument was held on July 10, 2015 after the parties submitted their briefs. Stout argued that the court should "keep in mind" the "obvious remedial social purpose of any public employee retirement system" and the borrowed use of workers' compensation tests in ERS cases such as Hua and Kikuta. Stout argued that key facts supporting Stout's eligibility for benefits were that she was on State property, and that she was doing something related to her State employment. Specifically, at the time she was shot, Stout was "doing what she was supposed to do: Public school teacher, helping her students, teaching her students, benefiting the [S]tate of Hawaii." Stout also asserted that the declaration given by DOE employee Wilfred Keola, Jr. ("Keola") regarding the operations and ...


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