Kawashima v. State, Department of Education.

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Electronically Filed
Supreme Court
SCAP-15-0000462
28-JUN-2017
08:17 AM

IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---o0o---

DIANE KAWASHIMA, individually and
on behalf of all others similarly situated,
Petitioner/Plaintiff-Appellee/Cross-Appellant,

vs.

STATE OF HAWAI#I, DEPARTMENT OF EDUCATION;
KATHRYN S. MATAYOSHI, in her official capacity as
Superintendent of Schools; LANCE A. MIZUMOTO, BRIAN J.
DELIMA, PATRICIA BERGIN, GRANT Y.M. CHUN, MAGGIE COX,
HUBERT MINN, KENNETH UEMURA, BRUCE VOSS, JIM WILLIAMS,
ANDREA LYN MATEO, and COLONEL PETER P. SANTA ANA,
in their official capacities as members of the
STATE OF HAWAI#I BOARD OF EDUCATION,
Respondents/Defendants-Appellants/Cross-Appellees,
(SCAP-15-0000462; CAAP-15-0000462; CIV. NO. 06-1-0244)

DAVID GARNER, PATRICIA SMITH, ANDREA CHRISTIE, ALLAN KLITERNICK,
KAREN SOUZA, JO JENNIFER GOLDSMITH, and DAVID HUDSON,
on behalf of themselves and all others similarly situated,
Petitioners/Plaintiffs-Appellees,

vs.
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STATE OF HAWAI#I, DEPARTMENT OF EDUCATION,
Respondents/Defendants-Appellants.
(SCAP-15-0000462; CAAP-15-0000462; CIV. NO. 03-1-000305)

--------------------------------------------------------

ALLAN KLITERNICK, DAVID GARNER, JO JENNIFER GOLDSMITH,
and DAVID HUDSON, individually and on behalf of all others
similarly situated, Petitioners/Plaintiffs-Appellees,

vs.

KATHRYN S. MATAYOSHI, in her official capacity as
Superintendent of Schools, LANCE A. MIZUMOTO, BRIAN J. DELIMA,
PATRICIA BERGIN, GRANT Y.M. CHUN, MAGGIE COX, HUBERT MINN,
KENNETH UEMURA, BRUCE VOSS, JIM WILLIAMS, ANDREA LYN MATEO, and
COLONEL PETER P. SANTA ANA, in their official capacity as members
of the STATE OF HAWAI#I BOARD OF EDUCATION, DEPARTMENT OF
EDUCATION, STATE OF HAWAI#I, Respondents/Defendants-Appellants.
(SCAP-15-0000462; CAAP-15-0000462; CIV. NO. 05-1-00031)

SCAP-15-0000462

APPEALS FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT

JUNE 28, 2017

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

OPINION OF THE COURT BY RECKTENWALD, C.J.

I. Introduction

This is a consolidated case involving substitute and

part-time temporary teachers who were employed by the State of

Hawai#i, Department of Education (“State” or “DOE”), and who

claim they were underpaid by the State.

Plaintiffs in the Garner case include more than 8,000

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substitute teachers (collectively “Garner Plaintiffs” or

“substitute teachers”) who were paid on a per diem basis.

Approximately half of the substitute teachers in Garner also

worked in a part-time capacity for which they were paid hourly

wages.

During a prior interlocutory appeal in Garner, the

Intermediate Court of Appeals (ICA) found that the circuit court

properly ruled that the substitute teachers were underpaid and

thus entitled to their per diem back wages pursuant to Hawai#i

Revised Statutes (HRS) § 302A-624(e). See Garner v. State, 122

Hawai#i 150, 154-55, 223 P.3d 215, 219-20 (App. 2009) (Garner I).

On remand, the circuit court ruled that the Plaintiff class

included the substitute teachers who were paid hourly wages and

calculated the amount of those wages due, and that Plaintiffs

were entitled to interest on their hourly and per diem back wages

under HRS § 103-10.

In 2014, the State paid a partial settlement to Garner

Plaintiffs in the amount of $14,031,874.70, which settled all per

diem wage claims for the claim period from November 8, 2000

through June 30, 2005. The State continued to dispute its

liability regarding the payment of the substitute teachers’

hourly back wages, and whether the teachers are entitled to

interest on their per diem and hourly wages.

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In 2015, the Circuit Court of the First Circuit

(circuit court) entered final judgment in Garner, awarding hourly

back wages to Plaintiffs who worked in a part-time capacity in

the amount of $6,789,175.21 for the period from November 8, 2000

through June 12, 2012.1 The circuit court also awarded interest

on both the per diem and hourly back wages owed, in the amount of

$13,542,186.74.

Plaintiffs in the Kawashima case include approximately

20,000 part-time temporary teachers (collectively “Kawashima

Plaintiffs,” “part-time teachers” or “PTTs”) who were paid on an

hourly basis. Similar to the substitute teachers claiming hourly

back wages in Garner, the PTTs in Kawashima argued that their

hourly pay rate, which was set forth in School Code Regulation

5203, was linked to the substitute teachers’ per diem pay rate

under HRS § 302A-624(e). Thus, based on the claimed linkage

between Regulation 5203 and HRS § 302A-624(e), the PTTs argued

that because the substitute teachers were underpaid, they too

were underpaid. The circuit court in Kawashima ruled that the

PTTs were underpaid and entitled to hourly back wages in the

amount of $24,026,329.52 for the period from February 20, 2004

through June 12, 2012.2 In contrast to Garner, however, the

1
In Garner, the Honorable Karl K. Sakamoto presided.
2
In Kawashima, the Honorable Edwin C. Nacino presided.

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circuit court in Kawashima ruled that the PTTs were not entitled

to interest on their unpaid hourly wages under HRS § 103-10.

Nevertheless, the circuit court determined that had Plaintiffs

been entitled to interest on their hourly back wages under HRS

§ 103-10, they would have been entitled to interest payments in

the amount of $9,450,085.40.

On appeal in Garner, the State argues that the circuit

court erred in: (1) determining that Plaintiffs’ claims for

hourly back wages were “properly part of this case”; (2)

determining that School Code Regulation 5203 is an HRS chapter 91

rule; (3) granting summary judgment in favor of the substitute

teachers on their hourly back wages contract claim; and (4)

determining that the substitute teachers were entitled to

interest on their hourly and per diem back wages under HRS § 103-

10.

On appeal in Kawashima, the State argues that the

circuit court erred in: (1) determining that School Code

Regulation 5203 is an HRS chapter 91 rule; and (2) denying the

State’s motion for summary judgment on the PTTs’ hourly back

wages contract claim. Kawashima Plaintiffs also cross-appealed

the circuit court’s rulings, arguing that they are entitled to

interest on their unpaid hourly wages under HRS § 103-10.

This court accepted transfer of both Garner and

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Kawashima, and subsequently consolidated the cases.

We conclude that Plaintiffs are not entitled to hourly

back wages, or interest on any back wages (whether per diem or

hourly) under HRS § 103-10. Because we decide the case on the

merits, we do not reach the question of whether the substitute

teachers’ hourly back wages were properly within the scope of the

Garner Plaintiffs’ claims.

Therefore, the circuit court’s May 19, 2015 judgment in

Garner is reversed and remanded for entry of judgment in favor of

the State. Additionally, the circuit court’s May 18, 2015

judgment in Kawashima is affirmed in part to the extent that the

circuit court determined that Plaintiffs are not entitled to

interest under HRS § 103-10, and reversed on all other remaining

grounds and remanded for entry of judgment in favor of the State.

II. Background

We first provide essential background information

regarding the compensation of substitute teachers and PTTs

employed by the State.

A. Substitute Teachers’ Compensation

In 1996, the legislature recodified the education

statutes and enacted HRS § 302A-624(e) (Supp. 1997), which

established the following per diem rate of pay for substitute

teachers:

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(e) Effective July 1, 1996, the per diem rate for
substitute teachers shall be based on the annual entry
step salary rate established for a Class II teacher on
the most current teachers’ salary schedule. The per
diem rate shall be derived from the annual rate in
accordance with the following formula:
Per Diem Rate = Annual Salary Rate ÷ 12 months ÷ 21
Average Working Days Per Month.

A “Class II teacher” is defined as “any teacher who

holds a certificate issued by the department based upon four

acceptable years of college education and other requirements as

may be established by the department[.]”3 HRS § 302A-618(b)(2)

(Supp. 1997).

3
Subsection (e) remained in effect as enacted until 2005, when the
legislature amended it as follows:

(e) Effective July 1, 2005, the minimum hourly or
minimum per diem rate for substitute teachers shall be
determined by the legislature; provided that the
department shall develop a classification and
compensation schedule that is not restricted to the
minimum compensation rates but may exceed them;
provided further that any individual in class I, II or
III who works less than a full seven-hour work day
shall be compensated on a prorated, hourly basis as
follows:
(1) Class I: other individuals who do not possess a
bachelor’s degree shall be compensated at a rate of
not less than $119.80 for a full work day;
(2) Class II: individuals with a bachelor’s degree
shall be compensated at a rate of not less than $130
for a full work day; and
(3) Class III: department of education teachers, or
licensed or highly qualified teachers, shall be
compensated at a rate of not less than $140 for a full
work day.

HRS § 302A-624(e) (Supp. 2005).
None of the issues in this appeal concern HRS § 302A-624(e) (Supp.
2005), and all further references to HRS § 302A-624(e) refer to HRS § 302A-
624(e) (Supp. 1997).

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B. Part-Time Teachers’ Compensation

Since at least 1945, the DOE has had a body of internal

guidelines called the “School Code.” In 1976, the Board of

Education (BOE) adopted School Code Regulation 5203, which linked

the hourly wage of PTTs to the per diem wage paid to substitute

teachers. Regulation 5203 provides:
E. Part-time Temporary Teachers (Academic and Non-
Academic)

EFFECTIVE SEPTEMBER 1, 1976:

Pay rates for Part-time Temporary Teachers
(Academic and Non-Academic) employed on an
hourly basis shall be based on the most current
Per Diem Rates established for Substitute
Teachers as follows:

Class I Per Diem Rate for Substitute
Teacher
Class II Per Diem Rate for Substitute
Teacher
Class III Per Diem Rate for Substitute
Teacher

Hourly Rates shall be derived from Per Diem
Rates in accordance with the following formula:

*Hourly Rate = Per Diem Rate ÷ 6 average
working hours per day

The regulation remained unamended until 2005, when the

first of a series of changes occurred. In January 2005, the DOE

issued a new version of the Regulation 5203, which stated,

“Compensation for Part-time Temporary Teachers on an hourly basis

shall be determined by the [DOE].” In a July 2005 memorandum,

Superintendent Patricia Hamamoto adjusted the pay rate of PTTs as

follows:

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Beginning July 1, 2005, all employees hired as
part-time teachers will be assigned to two classes.
Compensation will be determined by the academic
qualifications of the employee. The following is a
breakdown of the classes:

• Class A: Employees with a minimum of a
Bachelor’s Degree from an accredited
institution.
Compensation Rate: $22.43 per hour

• Class B: Employees with no Bachelor’s Degree.
Compensation Rate: $20.67 per hour

Payment for these employees will be retroactive to
July 1, 2005.

In 2006, the BOE retroactively ratified the

Superintendent’s July 2005 memorandum establishing the PTTs’ pay

rate. In 2009, the DOE issued “Standard Practice Document SP

5203” (SP 5203), which was intended to supersede Regulation 5203

that was amended January 2005. SP 5203 stated that compensation

for PTTs “shall be determined by the Department.” In 2012, the

DOE adopted Hawai#i Administrative Rules (HAR) chapter 8-66

(effective June 14, 2012) pursuant to HRS chapter 91’s rulemaking

procedures, which provided compensation rates for part-time

temporary teachers.4

4
HAR § 8-66-7 provides:

Compensation classes. A part-time temporary teacher
shall be assigned to a compensation class based on the
academic qualifications of the individual. The two
classes of compensation are:
(1) Class A for part-time temporary teachers
with a minimum of a bachelor’s degree from an
accredited institution of higher learning; and
(2) Class B for all part-time temporary teachers
not included in Class A.

(continued...)

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C. Garner Circuit Court Proceedings

In 2002, Plaintiffs David Garner, Patricia Smith,

Andrea Christie, and Allan Kliternick filed a class action

complaint in the Circuit Court of the Second Circuit, claiming

that the DOE failed to pay the substitute teachers’ wages

mandated by HRS § 302A-624(e), and seeking back pay for the 2000-

2001, 2001-2002, and 2002-2003 school years.5

The circuit court certified the Plaintiff class in

Garner to include:
[a]ll persons who have served in position numbers
75100, 75101, 75102, as identified on a DOE SF-5 as a
substitute teacher for the Hawaii DOE at public
schools of the State of Hawaii from November 8, 2000
through the present.

The class includes approximately 8,000 substitute

teachers. Approximately half of the substitute teachers in

Garner also worked in a part-time capacity for which they were

paid hourly wages, and argue that they are entitled to both their

per diem back wages and hourly back wages.

4
(...continued)

HAR § 8-66-8 provides:

Compensation rates. The hourly rate for the classes
of part-time temporary teachers are as follows:
(1) Class A: $22.43 per hour; or
(2) Class B: $20.67 per hour.
5
In 2003, the Garner lawsuit was transferred from the Second
Circuit to the First Circuit and assigned to then-Judge (now Justice)
Richard W. Pollack. The case was subsequently reassigned to the Honorable
Karen Ahn in 2004, and then reassigned to the Honorable Karl K. Sakamoto in
2008.

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In 2005, Plaintiffs Allan Kliternick, David Garner, Jo

Jennifer Goldsmith, and David Hudson filed a similar class action

complaint in Kliternick v. Hamamoto (Kliternick case), which

covered the 2004-2005 school year. Garner and Kliternick were

consolidated (collectively, the “Garner” case).

In Garner, Plaintiffs raised two claims for relief in

their operative complaint, seeking monetary damages and

injunctive relief for: 1) violation of HRS § 302A-624(e)

(underpaying the substitute teachers); and (2) violation of

contract rights (breach of obligation to pay teachers per diem

rate under HRS § 302A-624(e)). The State moved for summary

judgment as to all claims and parties, and Garner Plaintiffs

moved for partial summary judgment with respect to liability for

damages for the period from November 8, 2000 to June 30, 2005.

The circuit court granted in part and denied in part Garner

Plaintiffs’ motion for partial summary judgment, ruling, inter

alia, that the State violated its contractual obligation to pay

the substitute teachers per diem wages prescribed by HRS § 302A-

624(e). However, the circuit court ruled that the State had

sovereign immunity as to prejudgment interest, and thus denied

Garner Plaintiffs any prejudgment interest. The circuit court

then authorized an interlocutory appeal from its summary judgment

order.

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The ICA affirmed, inter alia, the circuit court’s

determination that the DOE violated its obligation to pay the

substitute teachers by failing to pay the per diem rate

prescribed by HRS § 302A-624(e). Garner I, 122 Hawai#i at 154,

223 P.3d at 219. The ICA also ruled that: (1) pursuant to HRS §

661-1,6 the substitute teachers’ claim for breach of contract

damages was not barred by sovereign immunity; (2) HRS § 302A-

624(e), as a pay mandating statute, provided an alternative basis

for invoking jurisdiction under the “founded upon any statute”

language in HRS § 661-1; and (3) HRS § 661-87 barred any award of

6
HRS § 661-1 (1993) (Jurisdiction) provides:

The several circuit courts of the State and, except as
otherwise provided by statute or rule, the several
state district courts, subject to appeal as provided
by law, shall have original jurisdiction to hear and
determine the following matters, and, unless otherwise
provided by law, shall determine all questions of fact
involved without the intervention of a jury:

(1) All claims against the State founded upon
any statute of the State; upon any rule of an
executive department; or upon any contract, expressed
or implied, with the State, and all claims which may
be referred to any such court by the legislature;
provided that no action shall be maintained, nor shall
any process issue against the State, based on any
contract or any act of any state officer that the
officer is not authorized to make or do by the laws of
the State, nor upon any other cause of action than as
herein set forth . . . .
7
HRS § 661-8 (1993) (Interest) provides:

No interest shall be allowed on any claim up to the
time of the rendition of judgment thereon by the
court, unless upon a contract expressly stipulating
for the payment of interest, or upon a refund of a
payment into the “litigated claims fund” as provided
by law.

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prejudgment interest under HRS § 478-2.8 Id. The ICA

specifically rejected the State’s argument that the substitute

teachers had assented to a lower rate of pay than required by HRS

§302A-624(e), reasoning that it was part of the parties’

agreement that the rate of pay was “subject to applicable State

laws,” and the parties “could not contract to violate a law

determining the rate of pay.”9 Id. at 170, 223 P.3d at 235

(citations omitted).

On remand, the substitute teachers pursued a different

theory regarding their interest claim and moved for an award of

interest on their unpaid per diem wages pursuant to HRS § 103-10

8
HRS § 478-2 (1993) (Legal rate; computation) provides:

When there is no express written contract fixing a
different rate of interest, interest shall be allowed
at the rate of ten per cent a year, except that, with
respect to obligations of the State, interest shall be
allowed at the prime rate for each calendar quarter
but in no event shall exceed ten per cent a year, as
follows:
(1) For money due on any bond, bill, promissory
note, or other instrument of writing, or for money
lent, after it becomes due;
(2) For money due on the settlement of accounts,
from the day on which the balance is ascertained;
(3) For money received to the use of another,
from the date of a demand made; and
(4) For money upon an open account, after sixty
days from the date of the last item or transaction.

As used in this section, “prime rate” means the prime
rate as posted in the Wall Street Journal on the first
business day of the month preceding the calendar
quarter.
9
Both sides filed applications for writ of certiorari, and both
applications were rejected.

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(1993).10 At a hearing on the motion, the circuit court

explained that according to Garner I, the substitute teachers

were unquestionably in a contractual relationship with the State,

and that HRS § 103-10 was a “pertinent statute incorporated by

the contractual relationship.” Thus, the circuit court

determined that HRS § 103-10 “constitute[d] a contract expressly

stipulating for the payment of interest as required under [HRS §]

661-8,” and concluded that Garner Plaintiffs were entitled to

10
HRS § 103-10 (1993) provides in relevant part:
(a) Any person who renders a proper statement for
goods delivered or services performed, pursuant to
contract, to any agency of the State or any county,
shall be paid no later than thirty calendar days
following receipt of the statement or satisfactory
delivery of the goods or performance of the services.
In the event circumstances prevent the paying agency
from complying with this section, the person shall be
entitled to interest from the paying agency on the
principal amount remaining unpaid at a rate equal to
the prime rate for each calendar quarter plus two per
cent, commencing on the thirtieth day following
receipt of the statement or satisfactory delivery of
the goods or performance of the services, whichever is
later, and ending on the date of the check. As used in
this subsection, “prime rate” means the prime rate as
posted in the Wall Street Journal on the first
business day of the month preceding the calendar
quarter.

(b) This section shall not apply in those cases
where delay in payment is due to:
(1) A bona fide dispute between the State or
any county and the contractor concerning the services
or goods contracted for;
(2) A labor dispute;
(3) A power or mechanical failure;
(4) Fire;
(5) Acts of God; or
(6) Any similar circumstances beyond the
control of the State or any county.

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interest on their per diem back pay under HRS § 103-10.11

The State moved for a ruling as to the scope of the

Garner Plaintiff class, and sought to preclude the Garner class

members’ recovery for unpaid hourly wages, seeking to limit

recovery to only per diem wages. Garner Plaintiffs filed a

counter motion, seeking to affirm the scope of the class, or in

the alternative to amend the class definition or the complaint.

The circuit court granted Garner Plaintiffs’ motion and denied

the State’s motion, ruling that the class members were entitled

to recover both per diem and hourly back wages.

Garner Plaintiffs then sought summary judgment for

hourly back wages owed and interest thereon under HRS § 103-10.

The State filed a counter summary judgment motion. During a

hearing on both motions, the circuit court stated that in the

“interest of comity,” it would follow the circuit court’s ruling

in the Kawashima case, finding that Regulation 5203 has the same

force and effect as law and is subject to HRS chapter 91.12 The

circuit court also determined that HRS § 103-10 was incorporated

into the parties’ contracts and awarded interest on the

11
The circuit court further stated that the HRS § 478-2 analysis in
Garner I did not apply here, and applied only to situations in which there was
an absence of an express contract, which was distinguishable from the instant
case.
12
The Kawashima circuit court’s ruling is discussed infra, Section
II.D.

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substitute teachers’ hourly back wages. The circuit court

subsequently filed an order granting Garner Plaintiffs’ motion

and denying the State’s motion, ruling that the substitute

teachers who also worked in a part-time capacity were entitled to

hourly back wages from November 8, 2000 until June 14, 2012 and

interest thereon under HRS § 103-10.

In 2014, the State paid a partial settlement to Garner

Plaintiffs in the amount of $14,031,874.70, which settled all per

diem wage claims for the claim period from November 8, 2000

through June 30, 2005. The State continued to dispute its

liability regarding the payment of hourly back wages.

On May 19, 2015, the circuit court entered final

judgment, awarding $6,789,175.21 to the substitute teachers for

their hourly back wages, and $13,542,186.74 for interest owed

under HRS § 103-10 on the hourly and per diem back wages through

May 18, 2015.

D. Kawashima Circuit Court Proceedings

In 2006, Diane Kawashima filed a class action

complaint, alleging that the DOE had underpaid all PTTs because

DOE’s School Code Regulation 5203 linked the hourly pay rates of

PTTs to the per diem pay rates for substitute teachers.13

13
On February 13, 2006, Kawashima filed a motion to intervene in the
Garner case. Garner I, 122 Hawaii at 154, 223 P.3d at 219. On April 27,
2006, the circuit court denied the motion. Id.

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Kawashima argued that because the DOE underpaid the substitute

teachers, it followed that the DOE underpaid the PTTs as well.

Kawashima moved for class certification, and the

circuit court granted the motion, appointing Kawashima as class

representative for a certified class of:
All persons employed by the State of Hawai#i
Department of Education, who were paid according to
the pay rates for Part-Time Teachers with or without a
differential (excluding the class members in [the
Garner and Kliternick cases]) at any time within the
applicable statute of limitations.

The Kawashima case was stayed pending resolution of the

interlocutory appeal in the Garner case. After the ICA issued

its decision in Garner I, the stay was lifted.14 Kawashima

Plaintiffs then filed a motion for summary judgment, arguing

that: (1) the DOE’s School Code Regulation 5203 expressly linked

the hourly pay rate for PTTs to the most current per diem pay

rate for substitute teachers, and because the State had underpaid

the substitute teachers, the State had necessarily underpaid the

PTTs; and (2) the DOE’s and BOE’s “litigation-driven” attempts to

amend Regulation 5203 beginning in January 2005 were improper and

ineffective.

At the hearing on the motion, the circuit court

determined that Regulation 5203 has the “same force and effect as

law,” and is subject to HRS chapter 91. The court also found

14
The Honorable Edwin C. Nacino presided from this point forward.

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that Regulation 5203 did not fall under the two exceptions of an

HRS chapter 91 rule because it did not involve internal

management or affect the private rights of the public. The court

reasoned that Regulation 5203 should have the same force and

effect as law because it “in all shape and form, refers to [HRS

§] 302A-624(e) with regards to how the part-time teachers should

be paid.” Accordingly, the circuit court granted Kawashima

Plaintiffs’ motion for summary judgment. Because the court

determined that Regulation 5203 is an HRS chapter 91 rule, any

amendments to Regulation 5203 would have had to be made in

accordance with HRS chapter 91’s rulemaking processes, which was

not completed until 2012 when the DOE adopted HAR chapter 8-66.

However, if the court had determined the Regulation 5203 was not

a rule, the DOE could have amended Regulation 5203 at any time,

and it would not have been subject to HRS chapter 91’s

restrictions.

Kawashima Plaintiffs filed a motion for interest under

HRS § 103-10 on the hourly unpaid wages, arguing that the circuit

court’s ruling in Garner that awarded substitute teachers

interest on their per diem back wages under HRS § 103-10 was

persuasive. The circuit court denied the motion without

prejudice. Kawashima Plaintiffs filed a renewed motion for

interest, arguing that the circuit court’s ruling in Garner that

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the substitute teachers were entitled to interest on both their

hourly and per diem back wages under HRS § 103-10 was persuasive.

The circuit court denied Kawashima Plaintiffs’ renewed motion.

Kawashima Plaintiffs filed a second renewed motion for summary

judgment for interest, and the State filed a cross-motion for

partial summary judgment as to interest. At the hearing on the

motions, the circuit court determined that HRS § 103-10 did not

apply to Kawashima Plaintiffs, and that the purpose and intent of

HRS § 103-10 “is to address goods and services being provided by

independent contractors, small business people, [and] maybe

persons in general [that are] not even considered a contractor

but [are] providing a service or goods to the State.” Thus, the

circuit court granted the State’s motion and denied Kawashima

Plaintiffs’ second renewed motion, ruling that as a matter of

law, Kawashima Plaintiffs were not entitled to interest on their

hourly back wages under HRS § 103-10.

In 2015, Kawashima Plaintiffs moved for summary

judgment to establish the amount of hourly back wages Plaintiffs

were owed, and the interest thereon under HRS § 103-10 had they

been entitled to it. The circuit court granted Kawashima

Plaintiffs’ motion, and on May 18, 2015, entered final judgment,

establishing that Kawashima Plaintiffs were entitled to damages

in the amount of $24,026,329.52 for their hourly back wages for

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the period from February 20, 2004 through June 12, 2012. The

circuit court also determined that had Plaintiffs been entitled

to interest on their hourly unpaid wages under HRS § 103-10, they

would have been entitled to $9,450,085.40 through May 6, 2015.

E. Garner Appeal

The State argues on appeal that the circuit court erred

in: (1) determining that the substitute teachers’ hourly back

wages were properly within the scope of Plaintiffs’ claims, (2)

determining that Regulation 5203 is an HRS chapter 91 rule, (3)

granting summary judgment in favor of the substitute teachers on

their hourly back wages contract claim, and (4) determining that

the substitute teachers were entitled to interest on their hourly

and per diem back wages under HRS § 103-10.

First, the State argues that the Garner Plaintiffs’

claims did not include their hourly back wages, and that the

trial court ignored prior rulings and the ICA’s decision in

Garner I when adding these claims. Second, the State argues that

Regulation 5203 is not an HRS chapter 91 rule because it was not

adopted pursuant to rulemaking procedures, and even if it was,

the State employees’ wages are a matter of internal concern and

should not be determined by rule. Third, the State argues that

the substitute teachers were paid the amount they contracted for,

and that they do not have a valid contract claim for the alleged

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additional wages owed. Fourth, the State argues that Garner

Plaintiffs are not entitled interest under HRS § 103-10 because

the ICA already ruled on that issue in Garner I and prejudgment

interest is not allowed.

In response, Garner Plaintiffs first argue that the

class members who worked for both per diem and hourly wages are

entitled to recover all their back wages because the class

membership included teachers in all of their roles, the circuit

court did not limit the scope of damages, and the State was given

fair notice that hourly wages, as well as per diem wages, were in

dispute. Second, Garner Plaintiffs argue that they are entitled

to wages mandated by Regulation 5203 because the State did not

lawfully sever the link between Regulation 5203 and HRS § 302A-

624 until June 2012 when it followed HRS chapter 91 rulemaking

procedures. Third, Garner Plaintiffs argue that with respect to

their contracts, the State cannot ignore the law and must pay its

employees lawfully prescribed rates of pay. Fourth, Garner

Plaintiffs argue that the circuit court had not previously

addressed the issue of interest under HRS § 103-10, and that HRS

§ 103-10 is a “specific, targeted ‘pay-mandating’ immunity-

waiving statute” that “creates a separate, enforceable waiver.”

F. Kawashima Appeal

In Kawashima, the State raises similar contentions as

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in the Garner appeal. In response, Kawashima Plaintiffs argue

that the State cannot enter into or enforce contracts that are

contrary to law, and that this issue was resolved in Garner I.

Kawashima Plaintiffs also argue that the BOE had sole authority

over the PTTs’ pay rates, and that it did not act in accordance

with HRS chapter 91, HRS chapter 89C, and HRS § 302A-1112,15

until June 2012 at the earliest.

On cross-appeal, Kawashima Plaintiffs raise one issue:

whether the circuit court erred in denying the PTTs interest on

their unpaid hourly wages under HRS § 103-10. Kawashima

Plaintiffs argue that the State has no immunity against an award

of interest under HRS § 103-10 because it is an “immunity-

waiving, money-mandating statute,” and that it applies broadly to

“persons” and “contractors.” In response, the State argues that

HRS § 103-10 is not applicable here because it applies only to

contractors with claims covered by the Procurement Code.

G. Transfer Applications

Kawashima and Garner Plaintiffs filed applications for

transfer to this court, and we granted transfer in both cases.

15
HRS § 302A-1112 (1996) (Rules) provides:

Subject to chapter 91, the board may adopt rules for
the government of all teachers, educational officers,
other personnel, and pupils, and for carrying out the
transaction of its business.

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The cases were subsequently consolidated.

III. Standards of Review

A. Summary Judgment

The appellate court reviews “the circuit court’s grant

or denial of summary judgment de novo.” Querubin v. Thronas, 107

Hawai#i 48, 56, 109 P.3d 689, 697 (2005) (quoting Durette v.

Aloha Plastic Recycling, Inc., 105 Hawai#i 490, 501, 100 P.3d 60,

71 (2004)). Accordingly,
[o]n appeal, an order of summary judgment is reviewed
under the same standard applied by the circuit courts.
Summary judgment is proper where the moving party
demonstrates that there are no genuine issues of
material fact and it is entitled to a judgment as a
matter of law. In other words, summary judgment is
appropriate if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine
issue of material fact and the moving party is
entitled to a judgment as a matter of law.

Iddings v. Mee-Lee, 82 Hawai#i 1, 5, 919 P.2d 263, 267 (1996);

see also Hawai#i Rules of Civil Procedure (HRCP) Rule 56(c)

(2000).16

16
HRCP Rule 56(c) provides, in relevant part:

The judgment sought shall be rendered forthwith if the
pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to
a judgment as a matter of law. A summary judgment,
interlocutory in character, may be rendered on the
issue of liability alone although there is a genuine
issue as to the amount of damages.

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B. Statutory Interpretation

“Statutory interpretation is a question of law

reviewable de novo.” First Ins. Co. of Hawaii v. A&B Props., 126

Hawai#i 406, 414, 271 P.3d 1165, 1173 (2012) (quoting State v.

Wheeler, 121 Hawai#i 383, 390, 219 P.3d 1170, 1177 (2009)

(internal quotation marks omitted)).

Our construction of statutes is guided by the following

rules:
First the fundamental starting point for
statutory-interpretation is the language of the
statute itself. Second, where the statutory language
is plain and unambiguous, our sole duty is to give
effect to its plain and obvious meaning. Third,
implicit in the task of statutory construction is our
foremost obligation to ascertain and give effect to
the intention of the legislature, which is to be
obtained primarily from the language contained in the
statute itself. Fourth, when there is doubt,
doubleness of meaning, or indistinctiveness or
uncertainty of an expression used in a statute, an
ambiguity exists.

Id. (quotations and citations omitted).
In construing an ambiguous statute, “[t]he meaning of
the ambiguous words may be sought by examining the
context, with which the ambiguous words, phrases, and
sentences may be compared, in order to ascertain their
true meaning.” Moreover, the courts may resort to
extrinsic aids in determining legislative intent. One
avenue is the use of legislative history as an
interpretive tool.

Silva v. City & Cnty. of Honolulu, 115 Hawai#i 1, 6-7, 165 P.3d

247, 252-53 (2007) (citations omitted) (quoting Hawaii Home

Infusion Assocs. v. Befitel, 114 Hawai#i 87, 91, 157 P.3d 526,

530 (2007)).

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IV. Discussion

The issues presented on appeal include whether the

circuit court erred in: (1) finding that the Garner Plaintiffs’

claims for hourly back wages were properly within the scope of

the case; (2) finding that Regulation 5203 was an HRS chapter 91

rule; (3) granting Plaintiffs summary judgment on their hourly

back wages contract claims; (4) either granting interest to the

substitute teachers in Garner on their hourly and per diem back

wages, or denying interest to the PTTs in Kawashima on their

hourly back wages.

For the following reasons, we conclude that Regulation

5203 is not an HRS chapter 91 rule, that it does not have the

force and effect of law, and that it was not incorporated into

Plaintiffs’ contracts. Thus, Plaintiffs are not entitled to

hourly back wages, and the circuit court erred in granting

Plaintiffs summary judgment on their hourly back wages contract

claims. In addition, we conclude that HRS § 103-10 is not

applicable here. Therefore, Plaintiffs are not entitled to

interest on their hourly and per diem back wages. Because we

decide this case on these grounds, we need not reach the issue of

whether the substitute teachers’ hourly wages were properly part

of the Garner case.

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A. The Circuit Court Erred in Finding That Regulation 5203 Is
an HRS Chapter 91 Rule

The first issue that we must address is whether

Regulation 5203 is a rule under HRS chapter 91. If a regulation

or procedure is determined to be a rule under HRS chapter 91, the

state agency with the proper authority must follow the rulemaking

procedures under HRS § 91-3 (2012) in order to adopt, amend or

repeal the rule. Thus, if Regulation 5203 is in fact a rule,

then the DOE did not properly amend Regulation 5203 until 2012

when it adopted HAR chapter 8-66 in accordance with HRS chapter

91 processes, and the State would be liable for the PTTs’ hourly

back wages. However, if we determine Regulation 5203 is not a

rule, then Regulation 5203 would be an internal policy that the

DOE may amend at any time, and the State would not be liable for

any hourly back wages.

We conclude that Regulation 5203 is not a rule. HRS §

302A-1112 (1996) provides broad authority for the BOE to adopt

rules subject to HRS chapter 91:
Subject to chapter 91 the [BOE] may adopt rules for
the government of all teachers, educational officers,
and other personnel, and for the carrying out the
transaction of its business.

Under HRS § 91-1(4) (2012), a rule is defined as

follows:
“Rule” means each agency statement of general or
particular applicability and future effect that
implements, interprets, or prescribes law or policy,

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or describes the organization, procedure, or practice
requirements of any agency. The term does not include
regulations concerning only the internal management of
an agency and not affecting private rights of or
procedures available to the public, nor does the term
include declaratory rulings issued pursuant to section
91-8, nor intra-agency memoranda.

Thus, the general definition of rule is a “statement of

general or particular applicability and future effect that

implements, interprets, or prescribes law or policy, or describes

the organization, procedure, or practice requirements of any

agency.” Green Party of Hawaii v. Nago, 138 Hawai#i 228, 237, 378

P.3d 944, 953 (2016). In Green Party, we concluded that the

Office of Election’s procedure to determine the number of

election ballots to be delivered to the precincts was a rule

because it “meets the generality element of HRS § 91–1(4) as it

is applied statewide for the ordering of ballots in every

precinct,” and would also “operate in the future.” Id. at 239-

40, 378 P.3d at 955-56; see also Nuuanu Valley Ass’n v. City &

Cty. of Honolulu, 119 Hawai#i 90, 99-100, 194 P.3d 531, 540-41

(2008) (determining that the Department of Planning and

Permitting of the City and County of Honolulu’s “policy of

refusing to publicly disclose . . . engineering reports prior to

their approval” was a rule because it “affect[ed] the procedures

available to the public” in that the files were “public records

and may be examined upon request”) (internal brackets and

quotation marks omitted) (citing HRS § 91-1(4))). Here,

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Regulation 5203 meets the generality requirement of HRS § 91–1(4)

because it applies statewide for all part-time teachers employed

by the DOE, and also operates in the future because it prescribes

prospective compensation for part-time teachers.

Nevertheless, although Regulation 5203 meets the

generality and future effect requirements of HRS § 91-1(4), it

falls within an exception to the general definition of a rule.

The exceptions to the general definition of rule include

“regulations that concern only the internal management of an

agency, and that do not affect private rights of or procedures

available to the public.” Green Party, 138 Hawai#i at 238, 378

P.3d at 954. When considering whether a regulation concerns

internal management, we consider “to whom the regulations are

directed. If the regulation is principally directed to its

staff, then it is generally considered to be a matter of internal

management.” Id. (citations omitted). We stated that this

approach is consistent with the legislative history of HRS § 91-

1(4):
It is intended by this definition of “rule” that
regulations and policy prescribed and used by an
agency principally directed to its staff and its
operations are excluded from the definition. In this
connection your Committee considers matters relating
to the operation and management of state and county
penal, correctional, welfare, educational, public
health and mental health institutions, operation of
the National Guard, the custodial management of the
property of the state or county or of any agency
primarily a matter of “internal management” as used in
this definition.

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Id. (quoting H. Stand. Comm. Report No. 8, in 1961 House Journal,

at 656).

However, even if it is “determined that a regulation

concerns only internal management of an agency, the exception

will apply only if it is also determined that the regulation does

not affect private rights or procedures available to the public.”

Id. at 238–39, 378 P.3d at 954–55 (stating that the exception was

“intended to have a ‘limited scope’ because it only applies if it

both relates to internal management of the agency and it does not

affect private rights or public procedures”).

This court has analyzed the applicability of the

internal management exception several times. At issue in Green

Party was whether the Office of Election’s methodology and

procedures in the 2012 election used to “(1) determine the number

of election ballots to be delivered to the precincts, (2) request

additional ballots when a precinct runs out of paper ballots, and

(3) count the votes cast on a ballot for a precinct in which the

voter is not entitled to vote,” constituted rules. 138 Hawai#i at

230, 378 P.3d at 946. This court concluded that the Office of

Election’s methodology used to determine the number of election

ballots to be delivered to the precincts was a “rule.” Id. at

241, 378 P.3d at 957. We reasoned that the ballot order method

“meets the generality element of HRS § 91–1(4) as it is applied

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statewide for the ordering of ballots in every precinct,” and

also would “operate in the future.” Id. at 239-40, 378 P.3d at

955-56. Regarding the exception, this court reasoned that,

“because ballot shortages may result in the deprivation of the

right to vote, the ballot order methodology does not qualify for

the internal management exception to the definition of a ‘rule.’”

Id. at 240, 378 P.3d at 956.

This court also concluded that the procedure for

counting votes cast on a ballot for an incorrect precinct

constituted a rule. Id. at 243, 378 P.3d at 959. With respect

to the internal management exception and the private rights of

the public, this court reasoned that:
[e]ven assuming that the procedure only concerned
internal management of the agency, the method used by
the Office of Elections would have a direct impact on
the right to vote, including the private right of
voters to have their votes counted. Such a policy
would not only affect the private right to vote, but
it could also impact the outcome of an election or
require a new election.

Id.

In Aguiar v. Hawaii Housing Authority, 55 Haw. 478, 522

P.2d 1255 (1974), this court determined that the Hawai#i Housing

Authority’s (HHA) internal regulations, which set forth maximum

income limits for continued occupancy by tenants in public

housing and established a payment schedule, were rules. Id. at

489-90, 522 P.2d at 1262-63. This court stated that the HHA’s

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amendment to its internal regulations “altered fundamentally the

rental structure in public housing-its immediate result was to

change the amount of rent paid by nearly every public housing

tenant.” Id. at 489, 522 P.2d at 1262. This court further

stated that the amendments “setting maximum income limits for

continued occupancy . . . determined every tenant’s eligibility

to remain in public housing.” Id. This court reasoned that

these amendments plainly “‘affected’ in both a practical and a

legal sense the ‘private rights’ not only of those tenants

actually living in public housing but also those members of the

public at large who were interested in becoming tenants.” Id.;

see also Aluli v. Lewin, 73 Haw. 56, 57, 59, 828 P.2d 802, 803-04

(1992) (finding that the State Department of Health’s issuance of

an “air pollution permit authorizing the construction and

operation of [geothermal] wells” which would emit hydrogen

sulfide was not in accordance with rulemaking, and that “[a]ir

quality is an integral part of the quality of life and the public

should have input in these matters”); Burk v. Sunn, 68 Haw. 80,

93, 705 P.2d 17, 27 (1985) (holding that the Department of Social

Services and Housing’s policy with respect to prorating benefits

under a food stamp program was a rule because it had a “direct

impact on the rights of Food Stamp recipients”).

In contrast, this court has held that bylaws or

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instructional procedures that do not affect “private rights of or

procedures available to the public” are not rules. See Rose v.

Oba, 68 Haw. 422, 427, 717 P.2d 1029, 1032 (1986). In Rose, a

doctor contended that his privileges to practice medicine at the

Hilo Hospital were “revoked pursuant to invalid procedures.” Id.

at 424, 717 P.2d 1030. The doctor argued that the “rules and

regulations pursuant to which his privileges were revoked were

not promulgated in accordance with the rule-making procedures

. . . as enacted in [HRS] Chapter 91.” Id. at 423, 717 P.2d

1030. This court held that the regulations were not rules under

HRS chapter 91 and that the:
provisions for corrective action in the Hilo Hospital
Bylaws do not affect private rights of or procedures
available to the public. At best, they only
indirectly affect the private rights of the public to
the extent the public has an interest in
qualifications of doctors practicing in public
hospitals, and to the extent a patient’s choice of
hospitals is reduced when his doctor’s privileges at a
particular hospital are revoked.

Id. at 427, 717 P.2d at 1032.

In Doe v. Chang, 58 Haw. 94, 564 P.2d 1271 (1977), this

court considered whether a manual of instructions for Department

of Social Services and Housing personnel concerning welfare fraud

investigations was subject to HRS Chapter 91 rulemaking

requirements. Id. at 95, 564 P.2d at 1272-73. This court held

that the manual of instructions concerned “only its internal

management” and did not “affect[] private rights of or procedures

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available to the public.” Id. at 96, 564 P.2d at 1273. This

court reasoned:
The only persons purporting to be instructed or
ordered thereby are the personnel of the department.
The manual does not define the circumstances under
which welfare recipients, or others not members of the
department personnel, shall be granted of [sic] denied
benefits. It does not command the public to do
anything, prohibit the public from doing anything or
declare the rights of the public in any respect. It
does not make any procedures available to the public.
We find it difficult to hypothesize a stronger example
of the internal regulation contemplated by HRS [§]
91-1(4).

Id.

Additionally, in In re Doe, 9 Haw. App. 406, 844 P.2d

679 (1992), the ICA considered whether the field sobriety testing

procedures established by the Hawai#i County Police Department

[HCPD] were a rule. Id. at 412, 844 P.2d at 682-83. The ICA

reasoned that, like Chang, the procedures were:
instructional in nature directed only to HCPD police
officers. The procedures instructed the officers how
to administer field sobriety tests to drivers
reasonably believed to have been [driving under the
influence], after they were properly stopped and
ordered out of their cars. Also, although field
sobriety tests intrude on drivers’ rights . . . HCPD’s
field sobriety testing procedures are aimed at
assuring the proper and correct methods of
administering the tests to drivers.

Id. at 412, 844 P.2d at 682; see also Ah Ho v. Cobb, 62 Haw. 546,

552, 617 P.2d 1208, 1212 (1980) (finding that an agreement to

rent excess space in a water transportation system was not a rule

because “it concerns only the internal management of the [State

Board of Land and Natural Resources] and does not affect the

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private rights of or procedures available to the public”); Crosby

v. State Dep’t of Budget & Fin., 76 Hawai#i 332, 345, 876 P.2d

1300, 1313 (1994) (affirming the circuit court’s conclusion that

a guideline by the State of Hawai#i Department of Accounting and

General Services (DAGS) to the other departments in the State as

to how DAGS interprets a statute was not a rule, reasoning that

the guideline was “sent only to other state agencies and does not

command or prohibit any action by any member of the public or any

public employee”); State v. Claunch, 111 Hawai#i 59, 67, 137 P.3d

373, 381 (App. 2006) (finding that the “police department’s

regulation establishing and implementing an intoxication control

roadblock program concerned only internal management of the

department and was therefore not required to be promulgated

pursuant to HRS Chapter 91”); State v. Tengan, 67 Haw. 451, 462,

691 P.2d 365, 373 (1984) (finding that the Director of

Transportation’s “approval of the use of the Intoxilyzer” was not

rule making because the Director set “no policy and exercised no

discretion with respect to the use of testing instruments; he

merely coordinated State and federal efforts to maintain accuracy

in chemical testing for blood alcohol”); Pilaa 400, LLC v. Bd. of

Land & Nat. Res., 132 Hawai#i 247, 265, 320 P.3d 912, 930 (2014)

(finding that there is “no statutory requirement to enact rules

regarding the valuation of damage to reef or valuable marine

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resources”).

Here, the instant case is akin to Rose, Chang, and In

re Doe, which involved regulations that focused on internal

management of an agency and did not affect the private rights of

members of the public. Regulation 5203, like the regulations and

policies in those aforementioned cases, falls squarely within the

exception. Regulation 5203 affects only the DOE’s internal

management of its part-time teachers’ hourly pay rate. Moreover,

Regulation 5203 does not command members of the public to do

anything or prohibit them from doing anything, nor does it

declare the rights of members of the public or affect a procedure

available to members of the public. Rather, Regulation 5203 at

best only indirectly affects private rights of members of the

public to the extent that the public has an interest in knowing

how teachers’ salaries are determined. This interest, however,

is not sufficient to remove Regulation 5203 from the exception

here.

The instant case is distinguishable from Green Party

and Aguiar. In those cases, the regulations affected the private

rights of members of the public and implemented law or policy,

and thus were found to be rules. For example, in Green Party,

the voting policies had a direct impact on the private right to

vote and the general public’s right to have their vote counted in

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an election. Green Party, 138 Hawai#i at 243, 378 P.3d at 959.

Additionally, in Aguiar, the HHA’s regulations fundamentally

altered the rental structure in public housing, which immediately

changed the amount of rent for almost all public housing tenants

and affected every tenant’s eligibility to remain in public

housing. Aguiar, 55 Haw. at 489, 522 P.2d at 1262. Here,

Regulation 5203 does not affect any private rights of the public

or any procedures available to the public, and does not prescribe

or implement law or policy. Instead, Regulation 5203 affects

only the internal management of a DOE part-time teachers’ pay

rate.

In sum, Regulation 5203 is not a rule under HRS chapter

91, and thus was not required to be amended under HRS chapter

91’s rulemaking procedures. Therefore, the circuit court erred

in finding that Regulation 5203 was a rule under HRS chapter 91.

B. The Circuit Court Erred in Granting Summary Judgment in
Favor of Plaintiffs for Their Hourly Back Wages Contract
Claims

The State argues that because Regulation 5203 is not a

rule, the Superintendent and the Board properly changed

Regulation 5203, and the State is not liable for any alleged

amounts owed after the change. The State also argues that

Regulation 5203 does not have the “force and effect of law and

cannot be incorporated into the contract or substituted for the

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actual agreement of the parties.” Garner and Kawashima

Plaintiffs argue that the State cannot enter into or enforce

contracts that are contrary to law, that it must pay its

employees lawfully prescribed rates of pay, and that this issue

was resolved in Garner I.

In Garner I, the ICA found that the substitute teachers

were entitled to their per diem back wages because as part of the

parties’ agreement, the teachers’ rate of pay was “subject to

applicable State laws,” and the parties “could not contract to

violate a law determining the rate of pay.” Garner I, 122

Hawai#i at 170, 223 P.3d at 235 (citations omitted). If we

accept arguendo Garner I’s threshold premise as true--that state

law is incorporated into contracts–-and if we determine that

Regulation 5203 has the force and effect of law, then Regulation

5203 would be incorporated into the part-time teachers’

contracts, and the State would be obligated to compensate the

PTTs for hourly back wages. Here, the part-time teachers’

argument is one step removed from the premise of Garner I because

the PTTs’ hourly pay rate is based on Regulation 5203, which

links their compensation to the substitute teachers’ pay rate

prescribed by state law. In contrast, in Garner I, the

substitute teachers’ pay rate is directly prescribed by statute

under HRS § 302A-624(e).

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We conclude that Regulation 5203 does not have the

force and effect of law, and that it is merely an internal policy

that may be amended at any time. Thus, Regulation 5203 is not

incorporated into the part-time teachers’ contracts, Plaintiffs

are not entitled to hourly back wages, and the circuit court

erred in granting summary judgment in favor of Plaintiffs for

their hourly back wages contract claims.

HRS § 89C-1 (Supp. 2000), grants “appropriate

authorities the necessary flexibility” to “adjust the wages,

hours, benefits, and other terms and conditions of employment for

their respective excluded public officers and employees.” HRS

§ 89C-1.5 (Supp. 2000) defines “appropriate authority” to include

the BOE. Further, HRS § 89C-4 (Supp. 2000) sets forth guidelines

for the BOE to adjust compensation for excluded employees exempt

from civil service: “Each appropriate authority shall determine

the adjustments that are relevant for their respective excluded

employees who are exempt from civil service in consideration of

the compensation and benefit packages provided for other

employees in comparable agencies.”17 Thus, HRS chapter 89C

17
At oral argument before this court, Plaintiffs argued that the
State stipulated to a violation of HRS chapter 89C in the Kliternick
stipulated order and amended judgment resolving all claims. Plaintiffs argued
that their second claim for relief in Kliternick was a violation of HRS
chapter 89C, and because the State stipulated on a “free-standing basis for
all the damages,” this was a stipulation to a violation of HRS chapter 89C.
However, the State did not explicitly stipulate to a violation of HRS chapter
(continued...)

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clearly provides statutory authority for the BOE to adjust the

wages of excluded employees, such as the part-time teachers here,

in order to reflect the compensation rates of other comparable

agencies. However, while HRS chapter 89C provides the BOE

authority and flexibility to adjust and amend the PTTs’ pay rate,

it does not confer the force and effect of law onto the School

Code Regulations.

Additionally, HRS § 302A-1112 provides broad authority

for the BOE to adopt rules subject to HRS chapter 91 for the

“government of all teachers” and for the “carrying out of the

transaction of its business.” Similar to HRS chapter 89C, while

HRS § 302A-1112 provides the authority for the BOE authority to

adopt HRS chapter 91 rules, it does not establish a process

separate from HRS chapter 91 that would give Regulation 5203 the

force and effect of law.

Further, HAR chapter 8-3 (2012) (Rules Applicable to

Rulemaking Proceedings) does not provide authority to support the

contention that Regulation 5203 has the force and effect of law.

HAR chapter 8-3 applies to HRS chapter 91 rules and sets forth

similar procedures to HRS chapter 91 that the BOE must follow

17
(...continued)
89C in either the Kliternick stipulated order or amended judgment. Moreover,
even if the State stipulated to a violation of HRS chapter 89C, HRS chapter
89C does not support Plaintiffs’ contention that Regulation 5203 has the force
and effect of law.

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when adopting and amending HRS chapter 91 rules. Thus, HAR

chapter 8-3 does not set forth a separate and distinct rulemaking

process apart from HRS chapter 91, but instead, aligns the BOE’s

procedures with HRS chapter 91.

In conclusion, Regulation 5203 does not have the force

and effect of law. Rather, Regulation 5203 is an internal policy

within the School Code that may be amended at any time. While

this court does not condone underpaying DOE teachers in violation

of DOE policy, here, the applicable law does not provide a basis

for the teachers’ entitlement to hourly back wages. Thus,

Regulation 5203 was not incorporated into the PTTs’ contracts,

and the circuit court erred in granting summary judgment in favor

of Plaintiffs for their hourly back wages contract claims.

C. Plaintiffs Are Not Entitled to Interest Under HRS § 103-10

The State argues that the ICA has already ruled in

Garner I that the teachers are not entitled to prejudgment

interest, and that Plaintiffs cannot “ignore the law of the case”

and “try again on another theory” and a “different statute on

remand.” The State also argues that because Plaintiffs prevailed

only on the theory that there was an express contract between the

teachers and the DOE, the only waiver of sovereign immunity as to

that claim is under HRS chapter 661, and that the teachers are

attempting to circumvent HRS § 661-8 by referring to HRS § 103-

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10. The State argues that HRS § 661-8 provides that no pre-

judgment interest is allowed except in certain instances, which

are not present here, and that any doubt must be resolved in

favor of the State. Further, the State argues that HRS § 103-10

does not apply because it should be applied only to contractors

in “complex, high value claims” covered by the Procurement Code.

Kawashima Plaintiffs argue that HRS § 661-8 does not

preclude the right to interest because HRS § 103-10 is an

“immunity-waiving, money-mandating statute” that confers a right

to interest which “cannot be nullified because litigation ensues

after an agency fails to pay.” Kawashima Plaintiffs also argue

that HRS § 103-10 applies broadly to anyone who provides services

to the State under a contract, and that the complexity of the

claim does not have a role in the application of the statute.

The Garner circuit court found that the substitute

teachers were entitled to interest on their per diem and hourly

back wages under HRS § 103-10, reasoning that the contract

between the parties incorporated applicable state law, including

HRS § 103-10, and thus HRS § 103-10 “constitutes a contract

expressly stipulating for the payment of interest as required

under [HRS] 661-8.”

In contrast, the Kawashima circuit court found that the

PTTs were not entitled to interest on their hourly back wages

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under HRS § 103-10, agreeing with the State’s contentions that

sovereign immunity under HRS § 661-8 applied, and that immunity

is waived only if the contract “calls for prejudgment interest.”

The Kawashima circuit court further determined that HRS § 103-10

did not apply here, and that the purpose and intent of HRS § 103-

10 was to “address goods and services being provided by

independent contractors, small business people,” and “maybe

persons in general” that are “not considered a contractor but

[are] providing a service or goods to the State.”

We begin our analysis by addressing the threshold

question of whether the ICA’s holding in Garner I precludes the

award of interest on another theory here. We conclude that it

does not. The State’s reliance on Taylor-Rice v. State, 105

Hawai#i 104, 94 P.3d 659 (2004) to support its contention the ICA

has already ruled that the teachers are not entitled to interest

is misplaced. In the underlying case, defendant Leigh and

defendant-appellee, State of Hawai#i, were found to be “joint

tortfeasors in an action arising from a single-car accident.”

Id. at 106, 94 P.3d at 661. In its judgment, the circuit court

found that “(1) the defendants were jointly and severally liable

for damages, costs, and post-judgment interest and (2) Leigh was

solely liable for pre-judgment interest.” Id. This court

determined that the plaintiffs did not “argue that the circuit

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court erred in failing to hold the State liable for pre-judgment

interest.” Id. Therefore, this court determined that “because

the plaintiffs did not challenge the circuit court’s failure to

hold the State liable for pre-judgment interest, the plaintiffs

‘must be held to acquiesce in’ the judgment and are precluded

from now challenging it.” Id.

Here, the issue of whether the teachers are entitled to

interest under HRS § 103-10 has not been foreclosed by the ICA’s

Garner I decision, which was an interlocutory appeal. While the

ICA ruled in Garner I that the substitute teachers were not

entitled to prejudgment interest under HRS §§ 661-8 and 478-2, it

did not make a determination regarding whether the substitute

teachers were entitled to interest on their back wages under HRS

§ 103-10. Contrary to the argument of the State, that ruling is

not the “law of the case” with regard to a completely distinct

theory that was not raised or addressed in that interlocutory

appeal.

Turning to the merits, HRS chapter 661, which is

entitled “Actions By And Against the State,” provides:
No interest shall be allowed on any claim up to the
time of the rendition of judgment thereon by the
court, unless upon a contract expressly stipulating
for the payment of interest, or upon a refund of a
payment into the “litigated claims fund” as provided
by law.

HRS § 661-8.

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Here, the record does not support the conclusion that

the teachers’ contracts expressly stipulated for the payment of

interest. The teachers’ contracts at issue, which consist of an

“Application for Part-Time Temporary Teacher Position (Form 150)”

and a “Payroll Understanding” form, do not expressly state that

the teachers will be entitled to the payment of interest.

However, Kawashima Plaintiffs further argue that HRS §

661-8 does not preclude an award of interest because HRS § 103-10

is an “immunity-waiving, money-mandating statute.” This court

has stated that statutory waivers of sovereign immunity will be

strictly construed and that “a waiver of sovereign immunity must

be unequivocally expressed in statutory text, and legislative

history cannot supply a waiver that does not appear clearly in

any statutory text,” nor can sovereign immunity be waived based

on policy arguments. Taylor-Rice, 105 Hawai#i at 110, 112, 94

P.3d at 663, 667. Therefore, any ambiguity as to whether HRS

§ 103-10 expressly waives sovereign immunity regarding payment of

interest should be construed in favor of the State.

As set forth below, the plain language of HRS § 103-10

is ambiguous as to whether it applies in the instant case.

Accordingly, we refer to the Findings and Purpose section of Act

292 (which was codified as HRS § 103-10), and HRS § 103-10’s

legislative history, in order to resolve that ambiguity, and

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conclude that HRS § 103-10 does not apply here.

HRS § 103-10 (Payment for goods and services) provides

in pertinent part:
(a) Any person who renders a proper statement for
goods delivered or services performed, pursuant to
contract, to any agency of the State or any county,
shall be paid no later than thirty calendar days
following receipt of the statement or satisfactory
delivery of the goods or performance of the services.
In the event circumstances prevent the paying agency
from complying with this section, the person shall be
entitled to interest from the paying agency . . . .

(b) This section shall not apply in those cases
where delay in payment is due to:

(1) A bona fide dispute between the State or
any county and the contractor concerning the services
or goods contracted for;
(2) A labor dispute;
(3) A power or mechanical failure;
(4) Fire;
(5) Acts of God; or
(6) Any similar circumstances beyond the
control of the State or any county.

Plaintiffs argue that HRS § 103-10 broadly applies to

“any person,” and that the term “contractor” includes the

teachers because the plain language definition of “contractor” is

“anyone who provides services under a contract.” Further, they

suggest that the definition of “contractor” in HRS § 103D-104 (a

“[c]ontractor means any person having a contract with a

government body”), supports their argument that HRS § 103-10

applies to the teachers in the instant case.

However, other provisions in the relevant statutes

suggest that HRS § 103-10 does not encompass claims for wages

brought by State employees, such as those at issue here.

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Relevant to our interpretation of HRS § 103-10, HRS §103-1.5

(1993) (Definitions) provides that: “The definitions of chapter

103D [(Hawaii Public Procurement Code)] shall apply to [HRS]

chapter [103] unless the context clearly requires otherwise.”

Under HRS § 103D-104 (1993) (Definitions), “contract” means “all

types of agreements, regardless of what they may be called, for

the procurement or disposal of goods or services, or for

construction.” Also pursuant to HRS § 103D-104, “procurement”

means:
buying, purchasing, renting, leasing, or otherwise
acquiring any good, service, or construction. The
term also includes all functions that pertain to the
obtaining of any good, service, or construction,
including description of requirements, selection and
solicitation of sources, preparation and award of
contracts, and all phases of contract administration.

Thus, the plain language of HRS § 103-10 and the

applicable definitions under HRS § 103D-104 indicate that the

type of contract referred to in HRS § 103-10 includes “agreements

. . . for the procurement or disposal of goods or services, or

for construction.” Applying those provisions here, it appears

that the teachers’ contracts are not agreements for the

procurement of goods or services as provided for in HRS § 103D-

104 and the Procurement Code. The teachers are not selling goods

or services, but rather are being compensated as employees in

accordance with their contracts with the State. Under this

interpretation, the teachers’ contracts would not be the type of

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contracts governed by HRS § 103-10.

Due to the ambiguity in the plain language of HRS

§ 103-10 and these related provisions, we turn to the Findings

and Purpose section of Act 292, which was later codified as HRS

§ 103-10, for guidance. See Poe v. Haw. Labor Relations Bd., 97

Hawai#i 528, 540, 40 P.3d 930, 942 (2002) (determining that

statements of findings and policy may be used to clarify

ambiguities as a “guide for determining legislative intent and

purpose”). The Findings and Purpose section supports the

conclusion that HRS § 103-10 does not apply to the teachers in

the instant case. The section reads as follows:
SECTION 1. Findings and Purpose. The legislature
finds that a substantial number of contractors selling
goods and services to the state and county governments
must frequently wait 90 to 120 or more days to receive
payment. The purpose of this Act is to require prompt
payment on government contracts.

1967 Haw. Sess. Laws Act 292, § 1 at 464.

Thus, the Findings and Purpose section of Act 292

indicates that the legislature intended HRS § 103-10 to be

applied to “contractors selling goods and services.” (Emphasis

added.) Plaintiffs are not “contractors” who are selling “goods

and services,” but rather are employees of the State. If the

legislature intended HRS § 103-10 to apply to any government

employee, such as the teachers in the instant case, the

legislature could have explicitly stated that in the plain

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language of HRS § 103-10. However, the legislature did not

provide any statutory language that explicitly makes HRS § 103-10

applicable to the type of contracts in this case.

Further, the legislative history also supports the

interpretation that HRS § 103-10 was not intended to be applied

to the teachers’ contracts at issue in the instant case. With

respect to HRS § 103-10, the Senate’s Federal-State-County

Relations and Government Efficiency Committee stated that:
The purpose of this bill is to require reasonably
prompt payments by the state to contractors for goods
delivered or services rendered and to require the
payment of interest at the rate of one-half of one
percent per month on balances unpaid within a
prescribed period.

Under present conditions, many [businesspersons]
providing goods and services to State agencies have
had to wait between 90 to 120 days after presentation
of invoices before receiving payment.

S. Stand. Comm. Rep. No. 663, in 1967 Senate Journal, at 1152.

The teachers here are not “businesspersons” who provide

goods and services to State agencies. Instead, the teachers are

government employees who are working pursuant to employment

contracts with the State.

In sum, both the Findings and Purpose section in Act

292 and the relevant legislative history support the conclusion

that HRS § 103-10 does not apply to Plaintiffs’ claims here.

Moreover, as noted above, any ambiguity concerning a waiver of

sovereign immunity should be construed in favor of the State.

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Accordingly, Plaintiffs are not entitled to interest on their

back wages.

V. Conclusion

In sum, the circuit court in both Kawashima and Garner

erred in: (1) determining that Regulation 5203 is an HRS chapter

91 rule, and (2) granting summary judgment in favor of Plaintiffs

for their hourly back wages contract claims. In Garner, the

circuit court further erred by finding that Plaintiffs were

entitled to interest on their per diem and hourly back wages

under HRS § 103-10.

For the foregoing reasons, the circuit court’s May 19,

2015 judgment in Garner is reversed and remanded for entry of

judgment in favor of the State. Additionally, circuit court’s

May 18, 2015 judgment in Kawashima is affirmed in part to the

extent that the circuit court determined that Plaintiffs are not

entitled to interest under HRS § 103-10, and reversed on all

other remaining grounds and remanded for entry of judgment in

favor of the State.

William J. Wynhoff /s/ Mark E. Recktenwald
and David D. Day
for appellants /s/ Paula A. Nakayama

Paul Alston and /s/ Michael D. Wilson
Eric G. Ferrer
for appellees /s/ Virginia L. Crandall

/s/ Gary W. B. Chang

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