In re Arbitration between Hawaii State Teachers Association and State of Hawaii, Department of Education. ICA Opinion, filed 11/26/2013. Consolidated with No. CAAP-11-0000140.

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Electronically Filed
Supreme Court
SCWC-11-0000065
11-AUG-2017
10:03 AM

IN THE SUPREME COURT OF THE STATE OF HAWAI#I

---O0O---

IN THE MATTER OF THE ARBITRATION BETWEEN
HAWAI#I STATE TEACHERS ASSOCIATION,
Respondent/Union-Appellant,

and

STATE OF HAWAI#I, DEPARTMENT OF EDUCATION,
Petitioner/Employer-Appellee.

SCWC-11-0000065

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-11-0000065; S.P. NO. 10-1-0165)

AUGUST 11, 2017

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY NAKAYAMA, J.

I. INTRODUCTION

At issue is whether the doctrine of sovereign immunity

protects the State from an arbitrator’s award of prejudgment

interest. We hold that, under the facts of this case, it does

not. Because judicial review of an arbitration award is confined
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to the strictest possible limits, and because the arbitrator in

this case reasonably interpreted the arbitration agreement in

fashioning the award, we hold that the arbitrator did not exceed

his authority in awarding prejudgment interest against the State.

We also hold that the award of attorneys’ fees and costs on

appeal was proper.

Thus, we affirm the Intermediate Court of Appeals’

(ICA) November 21, 2016 judgment on appeal, which 1) vacated in

part the Circuit Court of the First Circuit’s (circuit court)

February 24, 2011 final judgment, 2) reversed the circuit court’s

January 4, 2011 orders, 3) affirmed the circuit court’s

January 31, 2011 order, and 4) granted Hawai#i State Teachers

Association’s (HSTA) request for fees and costs.

II. BACKGROUND

A. Arbitration Proceedings1

On July 18, 2008, Kathleen Morita (Morita or grievant),

a public school teacher, was terminated from her job for

allegedly smoking marijuana and possessing alcohol while in her

classroom at Hau#ula Elementary School. HSTA filed a grievance

on Morita’s behalf and an arbitration hearing was held pursuant

to the collective bargaining agreement (the agreement) between

HSTA and the Hawai#i State Department of Education (State or

1
Walter H. Ikeda presided over the arbitration proceedings.

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Employer).

Article V of the agreement outlines the grievance

procedure, which provides that a grievant may request

arbitration. Article V.G.2.f provides the arbitrator with the

authority to enter an award in favor of the grievant if the

arbitrator finds that the Employer’s actions were improper:
When the arbitrator finds that any disciplinary action was
improper, the action may be set aside, reduced or otherwise
modified by the arbitrator. The arbitrator may award back
pay to compensate the teacher wholly or partially for any
salary lost. Such back pay award shall be offset by all
other compensation received by the grievant(s) including but
not limited to unemployment compensation or wages.

On May 7, 2010, the arbitrator issued a decision and

award, which sustained the grievance because the State lacked

just cause to terminate Morita. The arbitrator ordered that

Morita be restored to her position at Hau#ula Elementary School

and be given back wages “with interest at the rate of ten (10)

percent per annum on any unpaid amounts that are due and owing.”

The arbitrator also noted that he would “retain limited

jurisdiction for a period not to exceed 6 months from the date of

this award to assure compliance with the award.”

On July 28, 2010, HSTA filed a motion for final

decision and award requiring the State to pay Morita $30,454.57

in backpay, plus ten percent interest until the amount was fully

paid. In its memorandum in support of the motion, HSTA explained

that there “has been no compliance with the remedial terms of the

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award . . . as to back pay by Employer” and requested that the

arbitrator enter a final decision in order to settle any

remaining disputes over the calculation of the award between the

parties.

On September 27, 2010, the arbitrator entered a

compliance order. In it, the arbitrator noted that the State had

filed a July 22, 2010 motion to strike or vacate the interest

portion of the award with the circuit court and that this motion

was still pending at the circuit court level.2

As to the issues of backpay and interest (also labeled

throughout the proceedings as prejudgment or backpay interest),

the arbitrator offered the following explanation:
While the Union has requested a final award and order
which fixes the amount of backpay and interest, the
Arbitrator has elected to treat it as a compliance matter
pursuant to his continuing jurisdiction because the May 7,
2010 decision and award was final except for what normally
would have been ministerial mathematical calculation. As a
general proposition, Arbitrators are authorized to proceed
under the authority permitted by the collective bargaining
agreement and the Uniform Arbitration Act, HRS, Chapter
658A. As previously indicated in the order of June 16,
2010, the Arbitrator believes that he is acting in
conformity tithe [sic] Collective Bargaining Agreement and
the authority granted by HRS, Chapter 658A in the
determination that any backpay award includes interest at
the rate of 10 percent per annum. The purpose of an award
of backpay including interest is to “make whole” financially
the Grievant had she not been terminated. Elkouri &
Elkouri, How Arbitration Works, 6 th Ed. 2003, p. 1224.
Payment to the Grievant of wrongfully withheld pay without
interest would not restore her whole as loss of use of funds
for that period entailed either deprivation or additional
costs to the Grievant if she had to borrow funds to replace
lost wages while awaiting the results of her grievance. The

2
The State’s motion to strike is discussed in the following section.

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doctrine of interest assessed by an arbitrator as
compensation or penalty to prevent further damages is
demonstrated by Morris Knudsen Company vs. Makahuena
Corporation and Tea Pacific, Inc., 66 Haw. 663 (1983) and
Sussell vs. Civil Service Commission of the City & County of
Honolulu, 74 H,[sic] 599 (1993).

As such, the arbitrator reaffirmed his May 7, 2010 determination

that Morita was entitled to interest on unpaid backpay, but left

the calculation to the parties:
The Grievant is entitled to a reimbursement of backpay
of $25,169.05 excluding interest for the period from
August 1, 2008 to May 31, 2010. She is also entitled to
interest on any unpaid backpay at the rate of 10 percent per
annum. Since the Employer has indicated the possibility of
appealing at least the interest portion of the award, no
amount is set forth as to accrued interest. If the Employer
does not contest the principal amount of the backpay, it
should be paid forthwith as it may be the source of the
repayment by the Grievant of retirement benefits received
from the State of Hawaii Retirement System. The calculation
of accrued interest is left to the parties using financial
management software. The calculation should assume the
deficit in backpay accrued monthly from August 1, 2008 by
dividing the aggregate deficit in backpay for each year by
the number of months that the unpaid deficit remained unpaid
multiplied by the rate of 10 percent per annum until paid.

B. Circuit Court Proceedings3

On May 18, 2010, HSTA filed a motion to confirm the

arbitration award, entry of judgment and allowing costs and other

appropriate relief with the circuit court. The State filed a

response, arguing that Morita was not entitled to the awarded

interest and opposing HSTA’s request for attorneys’ fees and

costs.

Confusion appears to have arisen when the State filed

3
The Honorable Gary W.B. Chang presided.

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two separate motions, which sought the same relief from the

arbitrator’s award of interest, but relied on different statutory

grounds. The first, filed on July 9, 2010,4 was the State’s

motion to modify or correct the arbitration award (motion to

modify award), in which the State sought to modify the portion of

the arbitrator’s decision that awarded prejudgment interest on

the backpay. This motion was brought pursuant to Hawai#i Revised

Statutes (HRS) § 658A-24 (Supp. 2010).5

HSTA’s motion to confirm and the State’s motion to

modify the award were heard on July 15, 2010. At the hearing,

the State also made an oral request to file a motion to vacate

4
There is some discrepancy as to when this motion was filed. The motion
is dated July 8, 2010 but date stamped July 9, 2010.

5
HRS § 658A-24 (Supp. 2010), “Modification or correction of award,”
provides in full:

(a) Upon motion made within ninety days after the movant
receives notice of the award pursuant to section 658A-19 or
within ninety days after the movant receives notice of a
modified or corrected award pursuant to section 658A-20, the
court shall modify or correct the award if:
(1) There was an evident mathematical miscalculation
or an evident mistake in the description of a person,
thing, or property referred to in the award;
(2) The arbitrator has made an award on a claim not
submitted to the arbitrator and the award may be
corrected without affecting the merits of the decision
upon the claims submitted; or
(3) The award is imperfect in a matter of form not
affecting the merits of the decision on the claims
submitted.
(b) If a motion made under subsection (a) is granted, the
court shall modify or correct and confirm the award as
modified or corrected. Otherwise, unless a motion to vacate
is pending, the court shall confirm the award.
(c) A motion to modify or correct an award pursuant to this
section may be joined with a motion to vacate the award.

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the award.

The second of the State’s written motions, filed on

July 26, 2010,6 was the State’s motion to vacate in part the

arbitration award (motion to vacate award), in which the State

sought to vacate the portion of the arbitrator’s decision that

awarded prejudgment interest on the backpay. This motion was

brought pursuant to HRS § 658A-23 (Supp. 2010).7 On

September 13, 2010, a hearing was held on the State’s motion to

6
There is some discrepancy as to when this motion was filed. There are
two date stamps on the document, July 22, 2010 and July 26, 2010.

7
HRS § 658A-23 (Supp. 2010), “Vacating award,” provides in part:

(a) Upon motion to the court by a party to an arbitration
proceeding, the court shall vacate an award made in the
arbitration proceeding if:
(1) The award was procured by corruption, fraud, or
other undue means;
(2) There was:
(A) Evident partiality by an arbitrator
appointed as a neutral arbitrator;
(B) Corruption by an arbitrator; or
(C) Misconduct by an arbitrator prejudicing the
rights of a party to the arbitration proceeding;
(3) An arbitrator refused to postpone the hearing upon
showing of sufficient cause for postponement, refused
to consider evidence material to the controversy, or
otherwise conducted the hearing contrary to section
658A-15, so as to prejudice substantially the rights
of a party to the arbitration proceeding;
(4) An arbitrator exceeded the arbitrator's powers;
(5) There was no agreement to arbitrate, unless the
person participated in the arbitration proceeding
without raising the objection under section 658A-15(c)
not later than the beginning of the arbitration
hearing; or
(6) The arbitration was conducted without proper
notice of the initiation of an arbitration as required
in section 658A-9 so as to prejudice substantially the
rights of a party to the arbitration proceeding.

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vacate award. The circuit court orally granted the motion and

vacated the portion of the award that gave Morita prejudgment

interest. Counsel for HSTA was not at the hearing. Both parties

assert that there was a service error and that HSTA did not

receive notice of the hearing date until after the hearing.

On October 7, 2010, HSTA filed a motion for

reconsideration of the State’s motion to vacate award, arguing

that HSTA did not receive notice of the hearing on the State’s

motion. A hearing on HSTA’s motion for reconsideration was held

on November 22, 2010. Both parties appeared and argued as to

whether the doctrine of sovereign immunity applied when awarding

prejudgement interest. At the close of the hearing, the circuit

court took the matter under advisement. The following day,

November 23, 2010, the circuit court entered a minute order

denying HSTA’s motion for reconsideration.

Meanwhile, on October 1, 2010, the circuit court

entered three orders and one judgment: 1) Order Denying

Employer’s Oral Motion For Leave to File Motion to Vacate Award

Dated May 7, 2010, Filed Orally on July 15, 2010; 2) Order

Denying Employer’s Motion to Modify or Correct Award Dated May 7,

2010, Filed on July 18, 2010;8 3) Order Granting in Part and

8
The circuit court appears to have erred in noting in the title of the
order that this motion was filed on July 18, 2010. The circuit court, in the
(continued...)

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Denying in Part Motion to Confirm Arbitration Award, Entry of

Judgment and Allowing Costs and Other Appropriate Relief Filed on

May 18, 2010;9 and 4) Judgment (October judgment).

The October judgment reads in its entirety as follows:
Pursuant to the 1) order granting in part and denying
in part motion to confirm arbitration award, entry of
judgment and allowing costs and other appropriate relief
filed on May 18, 2010, entered on OCT.- 1, 2010, 2) order
denying Employer’s motion to modify or correct award dated
May 7, 2010, filed on July 18, 2010, entered on OCT.- 1,
2010, and 3) order denying Employer’s motion for leave to
file motion to vacate award dated May 7, 2010, filed orally
on July 15, 2010, entered on OCT.- 1, 2010, Judgment is
hereby entered in conformity with the arbitration award
filed on May 18, 2010 in accordance with Section 658A-25(a),
Hawaii Revised Statutes, in favor of the Hawaii State
Teachers Association and against Employer, State of Hawaii,
Department of Education.
This judgment is entered as to all claims raised by
the parties, and it resolves all claims by and against the
parties in the above-entitled case. No claims or parties
remain. Any and all remaining claims, if any, are dismissed
with prejudice.

(Formatting altered.)

On October 11, 2010, HSTA filed a motion to alter and

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(...continued)
text of the order, also notes that the motion was filed on July 8, 2010, which
more accurately reflects the record. The circuit court offered the following
explanation for denying the motion:

The Employer relies on subsection 3 of Section 658A-24(a),
Hawaii Revised Statutes, (HRS), for its motion and the
Court finds no authority to modify or correct. The change
sought by the Employer goes to the subject matter of the
award. The question of the 10% interest as awarded by the
arbitrator is part of the merits of the award and to modify
or correct as sought by the Employer would alter the
substance of the award.

9
The order granting in part HSTA’s motion to confirm the arbitration
award confirmed the May 7, 2010 decision and award of the arbitrator, entered
judgment in accordance with the arbitration award, and denied without
prejudice HSTA’s request for attorneys’ fees and costs. With note to the
denial of the fees and costs, the circuit court explained that HSTA did not
request a specific amount of fees and costs, and that HSTA could file another
motion that would afford the State the opportunity to contest the amount.

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amend the circuit court’s October judgment (motion to amend) so

that the judgment would either include the specific amount of

backpay reflected in the arbitrator’s compliance order or to

confirm the arbitrator’s compliance order. At the November 8,

2010 hearing on HSTA’s motion to amend, the circuit court orally

granted HSTA’s motion and ordered the State to pay Morita backpay

in the amount of $25,169.05. The court noted that HSTA’s motion

for reconsideration, which addressed the issue of the prejudgment

interest, would be heard on November 22, 2010.

On January 4, 2011, the circuit court entered two

written orders: 1) granting the State’s motion to vacate the

award as to the prejudgment interest, and 2) denying HSTA’s

motion for reconsideration.

On January 31, 2011, the circuit court entered its

written order, entitled “Order Granting HSTA’s Motion to Alter

and Amend Judgment Entered October 1, 2010 or in the Alternative

to Confirm Supplemental Arbitration Award Clarifying Award of

May 7, 2010, Filed October 11, 2010.” The order states:
It is hereby ordered, adjudged, and decreed that the
HSTA’s motion to alter and amend judgment entered October 1,
2010 or in the alternative to confirm supplemental
arbitration award clarifying award of May 7, 2010, is hereby
granted. The judgment will be amended to state the Employer
shall pay the employee $25,169.05.

(Formatting altered.) The order also addresses the issue of

retirement benefits, and then concludes with a final paragraph

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that an amended judgment would be filed at a later time. The

final paragraph, originally typed, states the following:
An amended judgment consistent with this order will
not be filed until the Court has ruled on the other matters
pending in the case, i.e., the HSTA’s request for attorney
fees and costs and the HSTA’s Motion for Reconsideration of
Employer’s Motion to Vacate in Part Award Dated May 7, 2010,
Filed July 26, 2010 which will be heard on November 22,
2010.

(Emphasis added.) The portion underlined above was subsequently

crossed out and in its place is the following handwritten

sentence: “An amended judgment consistent with this order shall

be filed at an appropriate time.”

On February 24, 2011, the circuit court entered a final

judgment, which reads as follows:
Pursuant to the 1) Order Granting In Part And Denying
In Part Motion To Confirm Arbitration Award, Entry Of
Judgment And Allowing Costs And Other Appropriate Relief
Filed On May 18, 2010, entered on October 1, 2010, 2) Order
Denying Employer’s Motion To Modify Or Correct Award Dated
May 7, 2010, Filed On July 18, 2010, entered on October 1,
2010, 3) Order Denying Employer’s Motion For Leave To File
Motion To Vacate Award Dated May 7, 2010, Filed Orally On
July 15, 2010, entered on October 1, 2010, 4) Minute Order
on Decision Regarding HSTA’s Motion to Allow Attorney’s Fees
and Costs, filed January 3, 2011, 5) Order Denying HSTA’s
Motion For Reconsideration Of Employer’s Motion To Vacate In
Part Award Dated May 7, 2010, filed January 4, 2011, 6)
Order Granting Employer’s Motion To Vacate In Part Award
Dated May 7, 2010, filed January 4, 2011, Final Judgment is
hereby entered in accordance with Section 658A-25(a) Hawaii
Revised Statutes, in favor of Hawaii State Teachers
Association (HSTA) and against Employer, State of Hawai#i,
Department of Education (DOE) on the reinstatement and back
pay to the grievant in conformity with the arbitration award
filed on May 18, 2010, and in favor of the DOE and against
HSTA on the 10% interest on the back pay in the arbitration
award and on HSTA’s request for fees.
This final judgment is entered as to all claims raised
by the parties, and it resolves all claims by and against
the parties in the above-entitled case. No claims or
parties remain.

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(Emphasis added.)

C. ICA Proceedings

On appeal, HSTA argued that the circuit court exceeded

its authority in vacating the interest portion of the arbitration

award because the doctrine of sovereign immunity was not

implicated in this case.10

1. The ICA’s 2013 Opinion

On November 26, 2013, the ICA issued a published

opinion in which it: 1) vacated the circuit court’s February 24,

2011 final judgment; 2) reversed the circuit court’s January 4,

2011 orders (order granting State’s motion to vacate award, and

the order denying HSTA’s motion for reconsideration); and 3)

dismissed HSTA’s appeal of the circuit court’s January 31, 2011

order granting HSTA’s motion to alter and to amend the October 1,

2010 judgment. Haw. State Teachers Ass’n v. State Dep’t of

Educ., 131 Hawai#i 301, 312, 318 P.3d 591, 602 (App. 2013),

vacated, CAAP-11-0000065, 2014 WL 4548491, at *1 (Haw. Ct. App.

Sept. 15, 2014) (HSTA I).

The ICA’s opinion held, inter alia, that the circuit

court erred when it vacated the portion of the arbitration award

10
On February 3, 2011, HSTA filed its first notice of appeal from the
circuit court’s January 4, 2011 orders, which was docketed as CAAP-11-0000065.
On March 9, 2011, HSTA filed a second notice of appeal from the circuit
court’s February 24, 2011 final judgment, which was docketed as CAAP-11-
0000140. The ICA consolidated these appeals under CAAP-11-0000065.

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pertaining to interest, concluding that “[n]either sovereign

immunity nor the statutory prohibition against the award of pre-

judgment interest against the State are implicated here.” Id. at

302, 318 P.3d at 592.

On September 15, 2014, the ICA entered an order

vacating the opinion sua sponte, “[i]n light of the Hawai#i

Supreme Court’s Opinion in Association of Condominium Homeowners

of Tropics at Waikele v. Sakuma, 131 Hawai#i 254, 319 P.3d 94

(December 17, 2013).” Haw. State Teachers Ass’n v. State Dep’t

of Educ., CAAP-11-0000065, 2014 WL 4548491, at *1 (Haw. Ct. App.

Sept. 15, 2014). The order further stated that a “new opinion

shall be filed.” Id.

2. The ICA’s 2016 Opinion

On September 30, 2016, the ICA issued an unpublished

memorandum opinion. Haw. State Teachers Ass’n v. State Dep’t of

Educ., CAAP-11-0000065, 2016 WL 5719745, at *1 (Haw. Ct. App.

Sept. 30, 2016) (HSTA II). This opinion, other than resolving

the procedural issues raised by Sakuma, was substantially similar

to its 2013 opinion in its analysis and disposition of the

issues.

Before reaching HSTA’s points on appeal, the ICA first

addressed two preliminary questions: 1) whether the ICA had

appellate jurisdiction to review all of the issues on appeal, and

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2) whether the circuit court had the authority to proceed to

enter orders and a second judgment after it entered the

October 1, 2010 judgment. Id. at *6.

In addressing the first question, the ICA first

concluded that the October judgment was “a final and appealable

judgment” pursuant to HRS §§ 658A-25 and 658A-28. Id. Next, the

ICA examined whether there was a timely appeal from the October

judgment. Id. The ICA noted that neither party timely appealed

the judgment, but that HSTA timely filed a post-judgment motion--

its motion to amend the October judgment. Id. The ICA further

explained that, under Hawai#i Rules of Appellate Procedure (HRAP)

Rule 4(a)(3), the circuit court failed to enter an order within

ninety days after the date that HSTA’s motion to amend was filed.

Id. at *6-7. In HSTA I, the ICA concluded that under HRAP Rule

4(a)(3), HSTA’s motion to amend was deemed denied on January 10,

2011 and that the parties would have had thirty days from that

date to timely file an appeal from the October judgment. Id. at

*7. The following excerpt from HSTA II explains why this

conclusion was incorrect:
However, in Sakuma, the majority opinion held that when a
timely post-judgment motion for reconsideration is deemed
denied, it does not trigger a thirty-day deadline for filing
a notice of appeal until thirty days after the entry of an
order disposing of the motion. . . . Thus, the HSTA’s Motion
to Amend 10/1/10 Judgment was not “deemed denied” on January
10, 2011 (as we previously had held), and the January 31,
2011 Order Granting HSTA’s Motion to Amend 10/1/10 Judgment
constitutes the effective disposition on this motion.
Finally, the January 31, 2011 Order Granting HSTA’s Motion

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to Amend 10/1/10 Judgment specifically states that: “An
amended judgment consistent with this order shall be filed
at an appropriate time.” This judgment appears to be the
2/24/11 Judgment, which expressly enters judgment on six
orders . . . [and] the HSTA timely filed a Notice of Appeal
from the 2/24/11 Judgment.

Id. Thus, the ICA concluded that it had appellate jurisdiction

over all of the issues raised in HSTA’s appeal. Id.

In addressing the second question, the ICA examined HRS

Chapter 658A, which sets out the framework for judicial action of

arbitration proceedings, and explained that the framework does

not contemplate the convoluted procedural posture of this case:
HRS Chapter 658A does not contemplate a case like this one,
where one party secures an order confirming an award, and
the court enters final judgment on the confirmation order,
while the other party later secures an order vacating in
part the same award, without challenging the court’s entry
of final judgment on the confirmation award.
We cannot speculate as to why the Circuit Court
entered the 10/1/10 Judgment notwithstanding the parallel
requests for relief. We also cannot speculate as to why the
State failed to seek relief from the 10/1/10 Judgment.

. . . .

HRS § 658A-23 provides statutory authority for relief
from an arbitration award, but not from a final judgment on
an order confirming an arbitration award. In order to seek
relief in the Circuit Court from a final judgment entered
pursuant to HRS § 658A-25(a), such as the 10/1/10 Judgment,
the State had to file a timely motion to alter or amend the
judgment. It did not. Under these circumstances, we must
conclude that the Circuit Court was no longer authorized to
enter an irreconcilably inconsistent order based on the
State’s Motion to Vacate Award. See Wong, 79 Hawai#i at 29-
30, 897 P.2d at 956-57. On this basis alone, we conclude
that the Circuit Court erred when it entered the Order
Partially Vacating Award and the Order Denying HSTA’s Motion
for Rehearing.

Id. at *8-9. As such, the ICA concluded that the circuit court

did not have authority to enter subsequent orders or another

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judgment after the October judgment. Id. at *9.

Despite arriving at this conclusion, the ICA went on to

analyze the substantive claims raised on appeal. The ICA

determined that, even if the circuit court could have vacated in

part the award, the circuit court erred in doing so in this case

because the State expressly waived sovereign immunity with

respect to Morita’s grievance. Id. The ICA explained that

Morita’s grievance was a contract claim pursuant to the

collective bargaining agreement and that, as such, the State

“waived its immunity with respect to the submission of the claim

to binding arbitration.” Id.

The ICA examined the collective bargaining agreement,

which provided that the “arbitrator may award back pay to

compensate the teacher wholly or partially for any salary lost,”

and determined that it was “clear from the record of the

arbitration proceedings that the Arbitrator interpreted this

contract provision to allow an award to include interest on back

pay in order to ‘wholly’ compensate a teacher for lost salary.”

Id. The ICA concluded that the arbitrator did not exceed his

powers in this regard and that “[e]ven if he incorrectly

construed the agreement or misinterpreted applicable law, he

acted within his power to interpret the agreement and fashion a

remedy in accordance with his interpretation.” Id. at *10

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(citing Daiichi Haw. Real Estate Corp. v. Lichter, 103 Hawai#i

325, 336, 82 P.3d 411, 422 (2003)).

Citing Kenneth H. Hughes, Inc. v. Aloha Tower

Development, Corp., 654 F. Supp. 2d 1142, 1149 (D. Haw. 2009),

the ICA further concluded that neither the doctrine of sovereign

immunity nor the statutory prohibition against awards of

prejudgment interest against the State prevented the arbitrator

from awarding interest against the State. Id. Therefore, the

ICA held that the circuit court erred in vacating that part of

the arbitrator’s award. Id.

As such, the ICA entered the following order:
For the foregoing reasons, we: (1) vacate in part the
Circuit Court’s February 24, 2011 Final Judgment; (2)
reverse the Circuit Court’s January 4, 2011 orders, the
Order Granting Employer’s Motion to Vacate in Part Award
Dated May 7, 2010, and the Order Denying HSTA’s Motion for
Reconsideration of Employer’s Motion to Vacate in Part Award
Dated May 7, 2010; and (3) affirm the Circuit Court’s
January 31, 2011 Order Granting HSTA’s Motion to Alter and
to Amend Judgment Entered October 1, 2010 or in the
Alternative to Confirm Supplemental Arbitration Award
Clarifying Award of May 7, 2010, Filed October 11, 2010.
This case is remanded to the Circuit Court for further
proceedings consistent with this Memorandum Opinion.

Id. at *11.

On October 12, 2016, the ICA entered an order granting

in part and denying in part HSTA’s request for attorneys’ fees

and costs filed on December 20, 2013. The ICA awarded HSTA fees

in the amount of $13,696.33 pursuant to HRS § 658A-25(c) and

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costs in the amount of $371.30 pursuant to HRS § 685A-25(b).11

The ICA noted that HSTA “may submit a supplemental motion for

costs within (5) days from the date of this order.”

On October 17, 2016, HSTA filed a supplemental motion

for expenses, requesting an additional $24.08 for the costs of

ordering a transcript of the November 8, 2010 proceeding. On

November 9, 2016, the ICA granted HSTA’s October 17, 2016

supplemental motion for expenses, awarding HSTA an additional

$24.08 in costs.

On November 21, 2016, the ICA entered its judgment on

appeal pursuant to its September 30, 2016 memorandum opinion,

October 12, 2016 order granting in part and denying in part

HSTA’s request for attorneys’ fees and costs, and November 9,

2016 order granting HSTA’s supplemental motion for expenses.

11
HRS § 658A-25 (2016), “Judgment on award; attorney’s fees and litigation
expenses,” provides in full:

(a) Upon granting an order confirming, vacating without
directing a rehearing, modifying, or correcting an award,
the court shall enter a judgment in conformity therewith.
The judgment may be recorded, docketed, and enforced as any
other judgment in a civil action.
(b) A court may allow reasonable costs of the motion and
subsequent judicial proceedings.
(c) On application of a prevailing party to a contested
judicial proceeding under section 658A-22, 658A-23, or
658A-24, the court may add reasonable attorney’s fees and
other reasonable expenses of litigation incurred in a
judicial proceeding after the award is made to a judgment
confirming, vacating without directing a rehearing,
modifying, or correcting an award.

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III. STANDARDS OF REVIEW

A. Judicial Review of Arbitration Awards

“[J]udicial review of an arbitration award is confined

to ‘the strictest possible limits,’ and a court may only vacate

an award on the grounds specified in HRS § 658A-23 and modify or

correct on the grounds specified in HRS § 658A-24.” State of

Haw. Org. of Police Officers (SHOPO) v. County of Kaua#i, 135

Hawai#i 456, 461, 353 P.3d 998, 1003 (2015) (alteration in

original) (quoting Daiichi, 103 Hawai#i at 336, 82 P.3d at 422).

“This standard applies to both the circuit court and the

appellate courts.” Id.
Judicial review of an arbitration award is limited by
the following precepts:

First, because of the legislative policy to encourage
arbitration and thereby discourage litigation, arbitrators
have broad discretion in resolving the dispute. Upon
submission of an issue, the arbitrator has authority to
determine the entire question, including the legal
construction of terms of a contract or lease, as well as the
disputed facts. In fact, where the parties agree to
arbitrate, they thereby assume all the hazards of the
arbitration process, including the risk that the arbitrators
may make mistakes in the application of law and in their
findings of fact.

Second, correlatively, judicial review of an
arbitration award is confined to the strictest possible
limits. An arbitration award may be vacated only on the
four grounds specified in HRS § 658-9 and modified and
corrected only on the three grounds specified in HRS § 658-
10. Moreover, the courts have no business weighing the
merits of the award.

Third, HRS §§ 658-9 and -10 also restrict the
authority of appellate courts to review judgments entered by
circuit courts confirming or vacating the arbitration
awards.

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Schmidt v. Pac. Benefit Servs., Inc., 113 Hawai#i 161, 165-66,

150 P.3d 810, 814-15 (2006) (citing Daiichi, 103 Hawai#i at 336,

82 P.3d at 422).

IV. DISCUSSION

The State presents both procedural and substantive

arguments in support of its position that the ICA erred in

vacating the circuit court’s judgment and upholding the

arbitrator’s award of interest against the State. Additionally,

the State takes issue with the ICA’s award of appellate fees and

costs to HSTA.

A. Procedural Issues

The State argues that the ICA erred in concluding that

the circuit court was not authorized to enter orders and

judgments that were irreconcilable with its October judgment.

The State provides four grounds for this argument: 1) this issue

was not raised before the ICA by either party; 2) the October

judgment was not final; 3) subsequent outstanding issues rendered

the October judgment non-final; and 4) HSTA’s motion to alter or

amend the October judgment rendered the October judgment non-

final.

1. The ICA did not err in considering an issue not raised
by the parties on appeal.

The State first argues that the ICA improperly reached

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an issue that was not raised by the parties during the circuit

court or appellate proceedings. Specifically, the State contends

that the “ICA decided this case primarily on the procedural issue

of whether the 10/1/10 Judgment had binding effect on and

superseded the subsequent orders in the case,” but that neither

of the parties raised this as an issue in their briefings before

the ICA.

HRS § 641-2(b) (2016) provides:
The appellate court may correct any error appearing on the
record, but need not consider a point that was not presented
in the trial court in an appropriate manner. No judgment,
order, or decree shall be reversed, amended, or modified for
any error or defect, unless the court is of the opinion that
it has injuriously affected the substantial rights of the
appellant.

(Emphasis added.) See also HRAP Rule 28(b)(4)(D) (2016) (“Points

not presented in accordance with this section will be

disregarded, except that the appellate court, at its option, may

notice a plain error not presented.” (emphasis added)).

Thus, while an appellate court need not consider a

point not properly raised on appeal, it is within its discretion

to consider and correct an error not raised. Additionally, as a

matter of jurisdiction, this issue needed to be addressed before

the ICA could consider the other issues. As such, the ICA did

not err in considering the issue of the October judgment even

though neither party raised it as a point of error.

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2. The ICA did not err in concluding that the October
judgment was a final and appealable judgment.

Second, the State argues that, even if the ICA could

raise the October judgment issue sua sponte, “the ICA erred in

giving the [October judgment] binding effect because it was not

in fact a final judgment.” According to the State, the October

judgment “was only a non-final, interim judgment.”

HRS Chapter 658A provides statutory authority for

courts to enter judgments on arbitration awards. HRS § 658A-

25(a) (Supp. 2010) reads in full: “Upon granting an order

confirming, vacating without directing a rehearing, modifying, or

correcting an award, the court shall enter a judgment in

conformity therewith. The judgment may be recorded, docketed,

and enforced as any other judgment in a civil action.”

Additionally, Hawai#i Rules of Civil Procedure (HRCP) Rule 58

(2010) provides in part that the “filing of the judgment in the

office of the clerk constitutes the entry of the judgment; and

the judgment is not effective before such entry.”

The October judgment, filed on October 1, 2010, reads

in full as follows:
Pursuant to the 1) order granting in part and denying
in part motion to confirm arbitration award, entry of judgment and
allowing costs and other appropriate relief filed on May 18, 2010,
entered on OCT.- 1, 2010, 2) order denying Employer’s motion to
modify or correct award dated May 7, 2010, filed on July 18, 2010,
entered on OCT.- 1, 2010, and 3) order denying Employer’s motion
for leave to file motion to vacate award dated May 7, 2010, filed
orally on July 15, 2010, entered on OCT.- 1, 2010, Judgment is
hereby entered in conformity with the arbitration award filed on

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May 18, 2010 in accordance with Section 658A-25(a), Hawaii Revised
Statutes, in favor of the Hawaii State Teachers Association and
against Employer, State of Hawaii, Department of Education.
This judgment is entered as to all claims raised by the
parties, and it resolves all claims by and against the parties in
the above-entitled case. No claims or parties remain. Any and
all remaining claims, if any, are dismissed with prejudice.

(Formatting altered) (emphasis added).

It is unclear how the October judgment could be

interpreted as anything other than a final judgment. It was

titled “JUDGMENT,” entered in accordance with HRS § 658A-25(a),

which provides authority for courts to enter judgments on

arbitration awards, and filed on October 1, 2010 pursuant to HRCP

Rule 58. Additionally, the language of the judgment is plain and

unambiguous. The judgment states in no uncertain terms:

“[j]udgment is hereby entered in conformity with the arbitration

award . . . in favor of [HSTA] and against [the State]”;

“judgment is entered as to all claims . . . and resolves all

claims”; “[n]o claims or parties remain”; and “[a]ny and all

remaining claims, if any, are dismissed with prejudice.” Given

its procedural conformity and clear, unambiguous language, the

October judgment cannot be interpreted as anything other than

what it was entitled--a judgment. See Wohlschlegel v. Uhlmann-

Kihei, Inc., 4 Haw. App. 123, 130, 662 P.2d 505, 511 (1983)

(“Obviously, a court order which is unambiguous and certain on

its face leaves no room for construction.”). As such, the

State’s argument that the October judgment was merely a “non-

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final, interim judgment” has no basis in the law or facts.

3. The ICA did not err in concluding that the October
judgment was final despite the State’s contention that
“outstanding issues” existed.

Third, the State argues that, even if the October

judgment appeared to be initially final, the existence of

outstanding issues rendered it non-final. The State relies on

Contrades v. Reis, 112 Hawai#i 367, 145 P.3d 910 (App. 2006), for

this argument.

In Contrades, the plaintiff (John) filed an action

against a property owner, alleging co-ownership of a parcel of

land. Id. at 368, 145 P.3d at 911. After the circuit court

entered an order and judgment in favor of the defendant, two

significant filings were made: 1) John filed a timely motion for

reconsideration that stayed the finality of the judgment, and 2)

another party (Louise) filed a motion to intervene as a

counterclaim defendant.12 Id. The circuit court orally granted

Louise’s motion to intervene before entering a written order

denying John’s motion for reconsideration. Id. at 368-69, 145

P.3d at 911-12. Now a party to the case, Louise moved to set

aside the court’s judgment, arguing that it was no longer a final

judgment pursuant to HRCP Rule 58 because it did not resolve all

issues and claims. Id. at 369, 145 P.3d at 912. Additionally,

12
Louise contended that she was a co-owner of and had an interest in the
subject property. Id. at 368 n.3, 145 P.3d at 911 n.3.

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both Louise and John filed notices of appeal from the circuit

court’s judgment. Id. The circuit court denied Louise’s motion

to set aside the judgment. Id. at 370, 145 P.3d at 913.

On appeal, the ICA explained that “a judgment, order,

or decree may not be appealed unless it is final” and that

“[g]enerally, a judgment, order, or decree is not final unless it

completely adjudicates all the claims or rights and liabilities

of all the parties.” Id. (quoting Sturkie v. Han, 2 Haw. App.

140, 145-46, 627 P.2d 296, 301 (1981)). Then, the ICA concluded

that:
prior to the time Louise and John filed their notices of
appeal, Louise had become a party. When Louise and John
filed their notices of appeal, Louise was a party but her
defenses and affirmative defenses remained undecided. All
claims against all parties not having been finally decided
when the notices of appeal were filed, we do not have
appellate jurisdiction.

Id. at 371, 145 P.3d at 914. Therefore, the ICA dismissed the

appeal for lack of appellate jurisdiction. Id.

The State argues that the Contrades case “is similar to

the present case” and points out that, in Contrades, the

existence of an intervening party with new claims after the

filing of the judgment destroyed the judgment’s finality.

However, the current case can be distinguished from Contrades in

a number of ways. First, Contrades involved an intervening party

who raised new claims after the judgment was filed. The circuit

court granted Louise’s motion to intervene before disposing of

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the motion for reconsideration; as a matter of law, the judgment

did not resolve all claims in the Contrades case.

In contrast, in the current case, subsequent to the

October judgment, there were no new parties or new claims.

Instead, new motions were filed seeking a different disposition

of the same claims. Additionally, the State’s motion to vacate

award and motion to modify award were both filed in July of 2010,

before the circuit court entered its October judgment. The

hearing on the State’s motion to modify was held in July, and the

hearing on the State’s motion to vacate was held in September,

both before the October judgment. Unlike in Contrades, where the

court was unaware of another party’s claims until a motion to

intervene was filed, the circuit court in the current case knew

of the State’s arguments regarding the arbitrator’s award of

interest before it entered the October judgment as to “all claims

raised by the parties.”

Thus, unlike in Contrades, no new parties or claims

were brought to the attention of the court prior to the judgment

becoming final. The State’s argument that “outstanding issues”

eviscerated the finality of the October judgment is unpersuasive.

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4. The ICA erred in concluding that the circuit court did
not have the authority to enter a subsequent judgment
after HSTA filed a motion to amend; however, such error
was harmless because the ICA also addressed the
substantive issues.

Finally under this point, the State argues that, even

if the October judgment was initially final, it was subsequently

set aside or rendered non-final by HSTA’s motion to alter or

amend.

This argument has merit. The procedural history of

this case, although convoluted, clearly shows that the circuit

court entered a subsequent final judgment in February 2011, and

that this final judgment was properly entered after an

appropriate motion by HSTA.

Parties have many tools at their disposal in dealing

with an unfavorable judgment. For instance, pursuant to HRCP

Rule 59, a party may petition for a new trial or file a motion to

alter or amend a judgment. Specifically, HRCP Rule 59(e) (2000)

provides that “[a]ny motion to alter or amend a judgment shall be

filed no later than 10 days after entry of the judgment.”

Additionally, pursuant to HRAP Rule 4(a)(1) (2016), a party may

file a notice of appeal “within 30 days after entry of the

judgment or appealable order.”

While neither party appealed the October judgment, HSTA

did file a timely post-judgment motion pursuant to HRCP Rule

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59(e) seeking to amend the October judgment. This motion was

filed on October 11, 2010, within the ten day window mandated by

HRCP Rule 59(e). On January 31, 2011, the circuit court entered

an order granting HSTA’s motion to amend the October judgment.13

While this order did not touch on the interest issue, it did note

that “[a]n amended judgment consistent with this order shall be

filed at an appropriate time.” On February 24, 2011, the circuit

court entered a final judgment, which expressly entered judgment

on six orders:
Pursuant to the 1) Order Granting In Part And Denying
In Part Motion To Confirm Arbitration Award, Entry Of
Judgment And Allowing Costs And Other Appropriate Relief
Filed On May 18, 2010, entered on October 1, 2010, 2) Order
Denying Employer’s Motion To Modify Or Correct Award Dated
May 7, 2010, Filed On July 18, 2010, entered on October 1,
2010, 3) Order Denying Employer’s Motion For Leave To File
Motion To Vacate Award Dated May 7, 2010, Filed Orally On
July 15, 2010, entered on October 1, 2010, 4) Minute Order
on Decision Regarding HSTA’s Motion to Allow Attorney’s Fees
and Costs, filed January 3, 2011, 5) Order Denying HSTA’s
Motion For Reconsideration Of Employer’s Motion To Vacate In
Part Award Dated May 7, 2010, filed January 4, 2011, 6)
Order Granting Employer’s Motion To Vacate In Part Award
Dated May 7, 2010, filed January 4, 2011, Final Judgment is
hereby entered in accordance with Section 658A-25(a) Hawaii
Revised Statutes, in favor of Hawaii State Teachers
Association (HSTA) and against Employer, State of Hawai#i,
Department of Education (DOE) on the reinstatement and back
pay to the grievant in conformity with the arbitration award
filed on May 18, 2010, and in favor of the DOE and against
HSTA on the 10% interest on the back pay in the arbitration
award and on HSTA’s request for fees.
This final judgment is entered as to all claims raised
by the parties, and it resolves all claims by and against
the parties in the above-entitled case. No claims or
parties remain.

(Emphasis added.)

13
The ICA’s HSTA II opinion explained that, under this court’s decision in
Sakuma, the January 31, 2011 order constituted the effective disposition of
HSTA’s motion. HSTA II, 2016 WL 5719745, at *7.

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Thus, HSTA’s motion to amend the October judgment

essentially opened the door for the circuit court to enter

another judgment, one that was unfavorable to HSTA. See Wong v.

Wong, 79 Hawai#i 26, 30, 897 P.2d 953, 957 (1995) (“Once a valid

judgment is entered, the only means by which a circuit court may

thereafter alter or amend it is by appropriate motion under HRCP

59(e).”). As such, the ICA erred in concluding that the circuit

court lacked authority to enter the February judgment.

However, regardless of whether the ICA erred in

ultimately concluding that the October judgment was the final

judgment in this case, such an error is harmless because the ICA

then went on to address the substantive claims: “Even assuming,

arguendo, that the Circuit Court could have vacated in part the

Award, after entering the 10/1/10 Judgment on the Order

Confirming Award, we conclude that the Circuit Court erred in

doing so in this case.” HSTA II, 2016 WL 5719745, at *9. The

ICA subsequently provided an in-depth analysis for this

conclusion. Id. at *9-10.

As such, our disposition of this case turns on the

ICA’s analysis and ultimate conclusion as to the substantive

issues, as detailed in the following section.

B. The Arbitrator’s Award of Prejudgment Interest

The State argues that even if the ICA did not err on

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the procedural issues, it did err in its resolution of the

substantive issues. According to the State, the ICA erred in

upholding the arbitrator’s award of prejudgment interest for two

reasons. First, the State contends that the ICA erred when it

concluded that the award of prejudgment interest did not violate

the doctrine of sovereign immunity. Second, the State contends

that the ICA erred in not applying the public policy exception to

arbitrations. As such, the State asserts that the circuit court

properly vacated the arbitrator’s award of prejudgment interest.

Before addressing the State’s substantive arguments

here, an overview of the statutory framework for vacating an

arbitration award provides useful context.

“[J]udicial review of an arbitration award is confined

to the ‘strictest possible limits,’ and a court may only vacate

an award on the grounds specified in HRS § 658A-23 and modify or

correct on the grounds specified in HRS § 658A-24.” SHOPO, 135

Hawai#i at 461, 353 P.3d at 1003 (alteration in original)

(quoting Daiichi, 103 Hawai#i at 336, 82 P.3d at 422).

HRS § 658A-23 provides six grounds that a court can

rely on when vacating an arbitration award:
(a) Upon motion to the court by a party to an arbitration
proceeding, the court shall vacate an award made in the
arbitration proceeding if:
(1) The award was procured by corruption, fraud, or
other undue means;
(2) There was:
(A) Evident partiality by an arbitrator
appointed as a neutral arbitrator;

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(B) Corruption by an arbitrator; or
(C) Misconduct by an arbitrator prejudicing the
rights of a party to the arbitration proceeding;
(3) An arbitrator refused to postpone the hearing upon
showing of sufficient cause for postponement, refused
to consider evidence material to the controversy, or
otherwise conducted the hearing contrary to section
658A-15, so as to prejudice substantially the rights
of a party to the arbitration proceeding;
(4) An arbitrator exceeded the arbitrator’s powers;
(5) There was no agreement to arbitrate, unless the
person participated in the arbitration proceeding
without raising the objection under section 658A-15(c)
not later than the beginning of the arbitration
hearing; or
(6) The arbitration was conducted without proper
notice of the initiation of an arbitration as required
in section 658A-9 so as to prejudice substantially the
rights of a party to the arbitration proceeding.

In this case, the relevant subsection of this statute

is part (a)(4) because the State contends that the arbitrator’s

interest award “exceeded the arbitrator’s powers.” “In

determining whether an arbitrator has exceeded his or her

authority under the agreement, ‘there should be no second

guessing by the court’ of the arbitrator’s interpretation of his

or her authority so long as the arbitrator’s interpretation

‘could have rested on an interpretation and application of the

agreement.’” SHOPO, 135 Hawai#i at 463, 353 P.3d at 1005

(quoting Local Union 1260 Int’l Bhd. of Elec. Workers v. Hawaiian

Tel. Co., 49 Haw. 53, 56, 411 P.2d 134, 136 (1966)).

We now address the State’s specific arguments regarding

the arbitrator’s award of prejudgment interest.

1. The ICA correctly concluded that the State waived its
sovereign immunity in the arbitration proceedings.

“The doctrine of sovereign immunity ‘refers to the

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general rule, incorporated in the Eleventh Amendment to the

United States Constitution, that a state cannot be sued in

federal court without its consent or an express waiver of its

immunity. The doctrine also precludes such suits in state

courts.’” Nelson v. Hawaiian Homes Comm’n, 130 Hawai#i 162, 168,

307 P.3d 142, 148 (2013) (quoting Sierra Club v. Dep’t of

Transp., 120 Hawai#i 181, 225-26, 202 P.3d 1226, 1270-71 (2009)).

See also Taylor-Rice v. State, 105 Hawai#i 104, 109, 94 P.3d 659,

664 (2004) (“[T]he State’s liability is limited by its sovereign

immunity, except where there has been a ‘clear relinquishment’ of

immunity and the State has consented to be sued.” (quoting Bush

v. Watson, 81 Hawai#i 474, 481, 918 P.2d 1130, 1137 (1996))).

When determining whether the State has waived its sovereign

immunity, Hawai#i has adopted the following guidance from federal

law:
(1) a waiver of the Government’s sovereign immunity will be
strictly construed, in terms of its scope, in favor of the
sovereign; (2) a waiver of sovereign immunity must be
unequivocally expressed in statutory text; (3) a statute’s
legislative history cannot supply a waiver that does not
appear clearly in any statutory text; (4) it is not a
court’s right to extend the waiver of sovereign immunity
more broadly than has been directed by the [legislature];
and (5) sovereign immunity is not to be waived by policy
arguments[.]

Kaleikini v. Yoshioka, 129 Hawai#i 454, 467, 304 P.3d 252, 265

(2013) (alteration in original) (quoting Taylor-Rice, 105 Hawai#i

at 110, 94 P.3d at 665).

The State argues that the ICA erred in holding that the

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State had waived its sovereign immunity with respect to the

arbitrator’s award of interest against the State. According to

the State, the ICA’s decision regarding sovereign immunity

directly conflicts with HRS § 661-8 (1993),14 and two Hawai#i

cases: Taylor-Rice and Garner v. State Dep’t of Educ., 122

Hawai#i 150, 223 P.3d 215 (App. 2009). The State contends that

these two cases held that a general waiver of sovereign immunity

is not enough to specifically waive sovereign immunity as to

prejudgment interest and that “any waiver of sovereign immunity

is to be strictly construed in favor of the State.”

In Taylor-Rice, this court considered the following

question in the context of a tort case: “Whether Appellee State

of Hawai#i, as a joint and several judgment debtor to [the

plaintiffs] under [HRS §] 663-10.9 . . . must pay statutory

interest on the full value of the judgment per [HRS] § 478-3, or

may pay only limited interest under section 662-8?” 105 Hawai#i

at 109, 94 P.3d at 664 (alteration in original). This court

concluded that the State was not required to pay prejudgment

interest for three reasons. First, this court noted that “the

14
HRS § 661-8 (1993) provides that “[n]o 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.”
This court has held that this statute immunizes the State against awards of
interest unless the State has expressly or statutorily waived its sovereign
immunity. Chun v. Bd. of Trs. of Emps.’ Ret. Sys., 106 Hawai#i 416, 433, 106
P.3d 339, 356 (2005).

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State was not found to be jointly and severally liable for pre-

judgment interest on the plaintiffs’ damages.” Id. at 110, 94

P.3d at 665. Second, this court explained that the plaintiffs

waived this claim because they did not challenge the circuit

court’s failure to hold the State liable for prejudgment

interest. Id. at 111, 94 P.3d at 666. Finally, this court noted

that “HRS § 662-2 provides in clear and unambiguous language that

‘the State . . . shall not be liable for interest prior to

judgment’” and that this “constitutes a plain reservation of

immunity with respect to pre-judgment interest on judgments

rendered against the State.” Id.

Similarly, in Garner, the ICA held that the State had

not waived its sovereign immunity from an award of prejudgment

interest in a case brought by a class action of substitute

teachers seeking backpay. 122 Hawai#i at 162-63, 223 P.3d at

227-28. The circuit court held that the doctrine of sovereign

immunity did not bar the plaintiffs’ claim for breach-of-contract

damages, but that it did bar the plaintiffs’ claim for

prejudgment interest. Id. at 156, 223 P.3d at 221. The ICA

affirmed the circuit court on these issues. Citing HRS § 661-8,

which provides that “[n]o interest shall be allowed on any claim

[against the State] up to the time of the rendition of judgment

thereon by the court,” the ICA determined that the circuit court

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did not err in denying the substitute teachers’ request for

prejudgment interest. Id. at 163, 223 P.3d at 228.

While both Taylor-Rice and Garner hold that prejudgment

interest cannot be awarded against the State in court

proceedings, neither of these cases address the issue of

prejudgment interest in arbitration proceedings. As such, they

are distinguishable from the case before us. This court has not

reached the specific issue presented in the current case;

however, other jurisdictions, including the federal district

court of Hawai#i, have considered this issue.

In Kenneth H. Hughes, Inc. v. Aloha Tower Development,

Corp., 654 F. Supp. 2d 1142 (D. Haw. 2009), the United States

District Court for the District of Hawai#i (district court)

considered an issue almost identical to the one before this

court. Hughes involved an arbitration award for damages relating

to a contract dispute between the State of Hawai#i and a Texas

corporation, Hughes, over the development of the Aloha Tower

complex in Honolulu. Id. at 1144-45. After the project failed,

Hughes filed a demand for arbitration pursuant to their

Development Agreement, which required that disputes be brought

before a mediator or arbitrator within the jurisdiction of the

Federal Arbitration Act (FAA). Id. at 1145. The arbitrator

awarded Hughes over $900,000 in reliance damages, over $270,000

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in pre-award interest, and more than $60,000 in attorneys’ fees

and costs. Id. The State filed a motion to vacate or modify the

arbitration award with the district court, arguing, inter alia,

that the award of interest violated the State’s sovereign

immunity.

Before addressing the issues before it, the district

court explained that the FAA “provides limited circumstances

under which a federal court may vacate or modify a binding

arbitration award” and that “[t]his authority is extremely narrow

and designed to preserve due process but not to permit

unnecessary intrusion into private arbitration procedures.” Id.

The district court also noted that 9 U.S.C. § 10(a)(4) provides

that a federal court may vacate an arbitration award “where the

arbitrators exceeded their powers, or so imperfectly executed

them that a mutual, final, and definite award upon the subject

matter submitted was not made.” Id. at 1146. The district court

further explained that the “Ninth Circuit has interpreted Section

(4) of the FAA, when an arbitrator exceeds its powers, to

encompass situations where an arbitrator’s decision is

‘completely irrational’ or exhibits a ‘manifest disregard of

law.’” Id. (quoting Kyocera Corp. v. Prudential-Bache Trade

Servs., 341 F.3d 987, 997 (9th Cir. 2003)).

In analyzing the State’s sovereign immunity claim, the

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district court construed the State’s argument to be that the

arbitrator exceeded his power under 9 U.S.C. § 10(a)(4) of the

FAA. Id. at 1148. The district court explained that, in order

to prevail, the State “must demonstrate that the arbitrator’s

decision to include interest was ‘completely irrational’ or

exhibited a ‘manifest disregard of law’ in violation of the

State’s sovereign immunity protections.” Id. at 1148-49. The

district court concluded that the State “fail[ed] to meet this

exceedingly high burden” for the following reasons. Id. at 1149.

First, the district court explained that, while Hawai#i

law does prohibit courts from awarding prejudgment interest,

there is no Hawai#i law that prohibits arbitrators from making

such awards:
Respondent relies on case law and Hawaii statute
regarding pre- and postjudgments made in a court of law as
evidence of the arbitrator’s error. But the arbitrator’s
decision is not a judgment of a court of law. Hawaii
Revised Statutes (“HRS”) section 661-8, relied on by
Respondent, states that: “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.” The arbitration
demand was not a claim and the award was not a judgment by
the court, and therefore HRS § 661-8 is not controlling.

Id.

Second, the district court determined that the State

“explicitly availed itself of arbitration.” Id. The district

court explained that the agreement that the State and Hughes

entered into stated that “any claims or disputes, not resolved in

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good faith, may be brought before a mediator or arbitrator within

the jurisdiction of the FAA.” Id. As such, the district court

determined that “the arbitrator did not manifestly disregard the

law when determining that the State waived sovereign immunity as

to interest in conjunction with its waiver as to damages.” Id.

The district court explained its reasoning for this

determination:
Because the FAA explicitly lists the grounds upon which a
court may vacate, courts will not find a manifest disregard
of the law where an arbitrator merely interprets or applies
the governing law incorrectly, and confirmation is required
even if an arbitrator makes an erroneous finding of fact. .
. . Rather, “it must be clear from the record that the
arbitrators recognized the applicable law and then ignored
it.”

Id. at 1146 (quoting Mich. Mut. Ins. Co. v. Unigard Sec. Ins.

Co., 44 F.3d 826, 832 (9th Cir. 1995)).

Although not controlling, Hughes is persuasive for

three reasons. First, the FAA’s statutory framework analyzed in

Hughes is nearly identical to that of Hawaii’s Uniform

Arbitration Act. For instance, under both the FAA and HRS

Chapter 658A, courts may vacate arbitration decisions where,

inter alia, “the arbitrators exceeded their powers.” 9 U.S.C. §

10(a); see also HRS § 658A-23(a)(4). Similarly, under both the

FAA and HRS Chapter 658A, courts may modify or correct an

arbitration award on three grounds: where there was a

mathematical miscalculation of the award, where there was an

award on a claim or matter not submitted to the arbitrator, or

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where the award was “imperfect in matter of form not affecting

the merits of the controversy.” 9 U.S.C. § 11; see also HRS §

658A-24(a).

In both Hughes and the current case, the State claimed

that the arbitrator had exceeded his authority in awarding the

prevailing party prejudgment interest. According to the district

court, an arbitrator exceeds its powers only when the

arbitrator’s decision is “completely irrational” or “exhibits a

manifest disregard for the law.” Hughes, 654 F. Supp. 2d at

1146. Although Hawai#i courts use a different standard for

determining whether an arbitrator has exceeded his or her powers,

the standard is similar in that it strongly curtails the court’s

ability to vacate an arbitrator’s award on such grounds: “In

determining whether an arbitrator has exceeded his or her

authority under the agreement, ‘there should be no second

guessing by the court’ of the arbitrator’s interpretation of his

or her authority so long as the arbitrator’s interpretation

‘could have rested on an interpretation and application of the

agreement.’” SHOPO, 135 Hawai#i at 463, 353 P.3d at 1005

(quoting Local Union 1260, 49 Haw. at 56, 411 P.2d at 136). As

such, although the district court relied, in part, on the FAA in

reaching its decision, Hawaii’s arbitration law mirrors the

federal law in important ways.

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Second, the district court’s analysis of the

applicability of HRS § 661-8 to arbitration proceedings is

reasonable and supported by the statutory framework of HRS

Chapter 658A. The language of HRS § 661-8 clearly states that

interest shall not be awarded against the State through a

“judgment thereon by the court.” HRS § 661-8 does not state that

an arbitrator is prohibited from awarding prejudgment interest

against the State. This reading is supported by HRS § 658A-21(c)

(Supp. 2010), which provides that arbitrators are authorized to

award remedies a court might be prohibited from granting:
As to all remedies other than those authorized by
subsections (a) and (b), an arbitrator may order such
remedies as the arbitrator considers just and appropriate
under the circumstances of the arbitration proceeding. The
fact that such a remedy could not or would not be granted by
the court is not a ground for refusing to confirm an award
under section 658A-22 or for vacating an award under section
658A-23.

(Emphasis added.) Thus, HRS § 661-8 appears to be inapplicable

in the arbitration context under the facts of this case.

Third and finally, as in Hughes, the State in the

current case availed itself of the arbitration proceedings. The

district court in Hughes noted that the State “explicitly availed

itself of arbitration in paragraph 21 of the Development

Agreement,” which stated that “any claims or disputes, not

resolved in good faith, may be brought before a mediator or

arbitrator within the jurisdiction of the FAA.” Hughes, 654 F.

Supp. 2d at 1149.

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Similarly, in the current case, the State was a party

to the collective bargaining agreement, which explicitly provided

for disputes to go to arbitration and stated that “[t]he

arbitrator may award back pay to compensate the teacher wholly or

partially for any salary lost.” This court has recognized that

“arbitrators have the authority to make an award of interest as

part of the determination of the total amount of compensation to

which the prevailing party is entitled” and that prejudgment

interest is “an element of complete compensation.” Hamada v.

Westcott, 102 Hawai#i 210, 217, 74 P.3d 33, 40 (2003) (quoting

Kalawaia v. AIG Haw. Ins. Co., 90 Hawai#i 167, 172-73, 977 P.2d

175, 180-81 (1999)).15 Thus, under Hawai#i law, the arbitrator’s

interpretation of “wholly compensate” was a reasonable reading of

the agreement and the arbitrator did not exceed his authority in

awarding prejudgment interest against the State. See also State

v. Alaska Pub. Emps. Ass’n, 199 P.3d 1161, 1165 (Alaska 2008)

(“Considering the closeness of this question, the policy favoring

effective arbitration, and the fairness of awarding interest, we

15
This court in Kalawaia concluded that “where the entire dispute is
submitted to arbitration and pre-award interest is not specifically excluded
by contract, arbitrators have the authority to make an award of interest as
part of the determination of the total amount of compensation to which the
prevailing party is entitled.” 90 Hawai#i at 173 n.11, 977 P.2d at 181 n.11.
This court explained that this conclusion “is sensible because the award of
interest is an element of compensation, and the entire dispute has been
submitted to arbitration to determine the amount of compensation due to the
injured party.” Id. The Kalawaia holding supports our conclusion in the
present case, as pre-award interest was not specifically excluded by the
arbitration agreement.

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are unable to conclude that the arbitrator’s decision to award

prejudgment interest against the State was gross error.”); John

Rocchio Corp. v. Town of Coventry, 919 A.2d 418, 419-20 (R.I.

2007) (upholding an arbitrator’s award of prejudgment interest

against a town after noting that the court has limited authority

to vacate an arbitration award).

Given the broad discretion afforded to arbitrators and

the strict limits confining judicial review of arbitration

awards, the State’s argument that the arbitrator exceeded his

powers is unavailing. For these reasons, the ICA did not err in

concluding that the State waived its sovereign immunity in the

arbitration proceedings, even as to the issue of interest.

2. The ICA correctly concluded that the public policy
exception to arbitrations does not apply in this case.

The State argues that the ICA also erred when it

“ignored the public policy exception” to arbitration awards.

The State contends that sovereign immunity is an explicit public

policy and that the violation of the public policy exception was

“clearly shown” when “the arbitrator awarded pre-judgment

interest despite the fact that the Collective Bargaining

Agreement did not ‘expressly’ provide for interest and despite

the rule requiring strict construction of waiver.”

Hawai#i recognizes a “limited public policy exception

to the general deference given arbitration awards.”

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Inlandboatmen’s Union of the Pac. v. Sause Bros., 77 Hawai#i 187,

194, 881 P.2d 1255, 1262 (App. 1994). Quoting the Supreme Court

of the United States, the ICA explained the exception:
A court’s refusal to enforce an arbitrator’s award . .
. because it is contrary to public policy is a specific
application of the more general doctrine, rooted in the
common law, that a court may refuse to enforce contracts
that violate law or public policy. [The ‘public policy’
exception] derives from the basic notion that no court will
lend its aid to one who founds a cause of action upon an
immoral or illegal act, and is further justified by the
observation that the public’s interests in confining the
scope of private agreements to which it is not a party will
go unrepresented unless the judiciary takes account of those
interests when it considers whether to enforce such
agreements.

Id. at 193, 881 P.2d at 1261 (quoting United Paperworkers Int’l

Union v. Misco, Inc., 484 U.S. 29, 42 (1987)). The public policy

exception is applicable only in cases where enforcing an

arbitration award or contract would involve illegality or violate

public policy. SHOPO, 135 Hawai#i at 465-67, 353 P.3d at 1007-

09; see also Inlandboatmen, 77 Hawai#i at 194, 881 P.2d at 1262

(providing examples of Hawai#i courts applying the public policy

exception).

The public policy exception is inapplicable in this

case. We have already determined in the previous section that

the State waived its sovereign immunity as to the arbitration

proceedings. Additionally, we have determined that the

arbitrator operated within his considerable discretion when he

interpreted the collective bargaining agreement to include an

award of prejudgment interest. Thus, an arbitrator’s reasonable

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award against the State when the State has availed itself of

arbitration and waived its sovereign immunity is not against

public policy or illegal. As such, the ICA did not err in

dismissing the State’s contention that the public policy

exception to arbitration awards should apply in this case.

C. Attorneys’ Fees and Costs on Appeal

“In contrast to compensation awarded to a party, the

well-accepted ‘American rule’ is that ‘in absence of contract or

statute a litigant has no inherent right to have his [or her]

attorney’s fees paid by his [or her] opponent.’” Hamada, 102

Hawai#i at 217, 74 P.3d at 40 (alteration in original) (quoting

Larsen v. Pacesetter Sys. Inc., 74 Haw. 1, 51, 837 P.2d 1273,

1297 (1992)); see also Sierra Club, 120 Hawai#i at 218, 202 P.3d

at 1263 (“[P]ursuant to the ‘American Rule,’ each party is

responsible for paying his or her own litigation expenses. This

general rule, however, is subject to a number of exceptions:

attorney’s fees are chargeable against the opposing party when so

authorized by statute, rule of court, agreement, stipulation, or

precedent.”)

In the current case, the ICA awarded HSTA fees and

costs incurred at the appellate level pursuant to HRS § 658A-25.

The State asserts that the ICA erred in this regard because HRS §

658A-25 does not provide for an award of fees and costs at the

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appellate level.16 This is an issue of first impression for this

court.

1. The ICA did not err in awarding fees and costs pursuant
to HRS § 658A-25.

HRS § 658A-25 (2016), “Judgment on award; attorney’s

fees and litigation expenses,” provides in full:
(a) Upon granting an order confirming, vacating without
directing a rehearing, modifying, or correcting an award,
the court shall enter a judgment in conformity therewith.
The judgment may be recorded, docketed, and enforced as any
other judgment in a civil action.
(b) A court may allow reasonable costs of the motion and
subsequent judicial proceedings.
(c) On application of a prevailing party to a contested
judicial proceeding under section 658A-22, 658A-23, or 658A-
24, the court may add reasonable attorney’s fees and other
reasonable expenses of litigation incurred in a judicial
proceeding after the award is made to a judgment confirming,
vacating without directing a rehearing, modifying, or
correcting an award.

The State points out that “court” is defined as “any

district or circuit court of competent jurisdiction in this

State, unless otherwise indicated.” HRS § 658A-1 (2016). The

State contends that HRS § 658A-25(b) and (c), when read in

conjunction with the definition section found in HRS § 658A-1,

16
The State presents two other arguments under this section. First, the
State argues that HSTA should not have prevailed on appeal and is therefore
not entitled to fees and costs. Because we held in the previous section that
the ICA did not err in concluding that HSTA was the prevailing party on
appeal, we do not address this argument further. Second, the State argues
that sovereign immunity protects the State against an award of attorneys’ fees
and costs. This argument also fails because HRS § 658A-25 expressly allows
for an award of fees and costs to the prevailing party in a contested judicial
proceeding. The State availed itself of HRS Chapter 658A when it entered into
an arbitration agreement with HSTA; this serves as a statutory waiver of the
State’s sovereign immunity with regard to attorneys’ fees and costs under the
Chapter as well. See Sierra Club, 120 Hawai#i at 228-29, 202 P.3d at 1273-74
(holding that a statutory waiver of the State’s sovereign immunity as to the
underlying claim also waives the State’s sovereign immunity as to attorneys’
fees resulting from the litigation of that claim).

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provide for an award of fees and costs only at the circuit or

district court level.

However, the legislative history reveals that the

statute was not intended to be interpreted so narrowly. The

Hawai#i legislature enacted Chapter 658A in 2001 in order to

“standardize Hawaii’s arbitration laws with those used in other

states by replacing the current statutory chapter on arbitration

and awards with the Uniform Arbitration Act.” Conf. Comm. Rep.

No. 115, in 2001 House Journal, at 1093, 2001 Senate Journal, at

905. Under its original iteration in 2001, “court” was defined

as “the circuit court of the appropriate judicial circuit in this

State, unless otherwise indicated.” 2001 Haw. Sess. Laws Act

265, § 1 at 810. In 2006, the legislature amended the definition

to include district courts for the following reasons:
Under the existing laws, the district courts have
exclusive jurisdiction over civil claims in which the
disputed amount is $10,000 or less. However, the circuit
courts have exclusive jurisdiction over disputes subject to
arbitration regardless of the amount in dispute. Many
disputes subject to arbitration are well below the $10,000
limit at which the district courts would normally have
jurisdiction. The legislature finds that this is not an
economical or efficient use of judicial resources and it
discourages the use of arbitration in the area of small
disputes. Therefore, the mere existence of an arbitration
agreement should not impact which court has jurisdiction
over civil claims.
The purpose of this Act is to give the district courts
jurisdiction over civil actions subject to arbitration
agreements where the amount in dispute is less than $10,000,
unless the arbitration is subject to chapter 89, chapter
377, or the National Labor Relations Act.

2006 Haw. Sess. Laws Act 72, § 1 at 128.

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The legislative history shows that the legislature, in

defining “court,” was interested in articulating which court had

jurisdiction over the arbitration proceedings when the litigation

was initiated; nothing in the legislative history indicates that

the legislature intended that “court” be limited to the district

or circuit courts after these initial proceedings were appealed.

This interpretation is supported by the commentary to

the 2000 Revised Uniform Arbitration Act (UAA), which HRS Chapter

658A is modeled after. Under the UAA, “court” is defined as “a

court of competent jurisdiction in this State.” Unif.

Arbitration Act § 1 (Nat’l Conference of Comm’rs on Unif. State

Laws 2000). Significantly, the commentary to this section

explains that “[d]ifferent States determine which court in its

system has jurisdiction over arbitration matters in the first

instance.” UAA § 1 cmt. n.3 (emphasis added). As such, the UAA

directs states to define “court” in order to resolve the issue of

which court, district or circuit, a party turns to when initially

contesting an arbitration award.

Additionally, commentary to UAA § 2517 explains the

17
HRS § 658A-25(c) was modeled after UAA § 25(c) and the two sections are
nearly identical. UAA § 25(c) provides:

On [application] of a prevailing party to a contested
judicial proceeding under Section 22, 23, or 24, the court
may add reasonable attorney’s fees and other reasonable
expenses of litigation incurred in a judicial proceeding
after the award is made to a judgment confirming, vacating
without directing a rehearing, modifying, or correcting an
award.

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policy behind allowing courts to award attorneys’ fees and costs

in a contested judicial proceeding. Notably, the policy

articulated in the commentary applies equally to trial and

appellate courts reviewing arbitration awards:
Section 25(c) promotes the statutory policy of
finality of arbitration awards by adding a provision for
recovery of reasonable attorney’s fees and reasonable
expenses of litigation to prevailing parties in contested
judicial actions to confirm, vacate, modify or correct an
award. Potential liability for the opposing parties’ post-
award litigation expenditures will tend to discourage all
but the most meritorious challenges of arbitration awards.
If a party prevails in a contested judicial proceeding over
an arbitration award, Section 25(c) allows the court
discretion to award attorney’s fees and litigation expenses.

UAA § 25 cmt. n.3 (emphasis added). As such, attorneys’

fees serve the purpose of discouraging a party from a

nonmeritorious challenge to an arbitration award; this holds

true even for appellate proceedings, as other jurisdictions

have noted.

For instance, in Blitz v. Beth Isaac Adas Israel

Congregation, 720 A.2d 912, 920 (Md. 1998), the Court of Appeals

of Maryland concluded that, under a statute substantially similar

to HRS § 658A-25, “the prevailing party is entitled to recover

attorneys’ fees incurred both at trial and on appeal in

confirming and enforcing an arbitration award.” In making this

decision, the Maryland court noted that there was a “significant

difference” between the initial arbitration proceedings, where

attorneys’ fees are only allowed if provided for in the

arbitration agreement, and the subsequent confirmation

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proceedings. Id. at 917. In the confirmation proceedings, the

Maryland court explained that the UAA specifically provides for

attorneys’ fees because such a policy encourages speedy

resolutions of arbitration disputes. Id. at 917-18. The

Maryland court also noted that other jurisdictions have

recognized the importance of preventing drawn-out confirmation

proceedings:
The interpretations of our sister states also promote the
public policy of encouraging early payment of valid
arbitration awards and the discouragement of nonmeritorious
protracted confirmation challenges. The prefatory comment
to the 1954 draft of the Uniform Arbitration Act stated that
court intervention in arbitration ‘must be prompt and simple
or the values of arbitration will be largely dissipated
through prolonged litigation.’

Id. (quoting Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 882

P.2d 1274, 1279 (Ariz. 1994)); see also Buzas Baseball, Inc. v.

Salt Lake Trappers, Inc., 925 P.2d 941, 952-53 (Utah 1996)

(holding that petitioners, who had received an arbitration award,

were entitled to reasonable attorneys’ fees incurred in defending

the award on appeal under the Utah Arbitration Act).

Given the legislative history of HRS Chapter 658A, the

language and commentary of the UAA, and the guidance offered by

other jurisdictions, we conclude that the ICA did not err in

awarding HSTA attorneys’ fees and costs on appeal pursuant to

HRS § 658A-25.

V. CONCLUSION

For the reasons stated above, the ICA’s November 21,

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2016 judgment on appeal, which 1) vacated in part the circuit

court’s February 24, 2011 final judgment, 2) reversed the circuit

court’s January 4, 2011 orders, 3) affirmed the circuit court’s

January 31, 2011 order, and 4) granted HSTA’s request for fees

and costs, is affirmed.

Robert T. Nakatsuji /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
Herbert R. Takahashi and
Rebecca L. Covert for /s/ Sabrina S. McKenna
respondent
/s/ Richard W.Pollack

/s/ Michael D. Wilson

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