August 22, 2017

The Doctrine of Sovereign Immunity held to have been waived with respect to litigation challenging an arbitration award

The Doctrine of Sovereign Immunity held to have been waived with respect to litigation challenging an arbitration award
In Re: The Arbitration Between Hawai'i State Teachers Association and the State of Hawai'i, Department of Education, Hawai'i Supreme Court, SCWC-11-0000065

In the United States the Doctrine of Sovereign Immunity stands for the proposition that the Federal government or a State government cannot be sued without its permission.* This doctrine was tested in a case decided by Hawai'i's highest court ... In Re: Arbitration Between Hawai'i State Teachers Association and the State Of Hawai'i, Department Of Education [DOE].

The genesis of this case was the termination of a public school teacher for allegedly smoking marijuana and possessing alcohol while in her classroom.  The Hawai'i State Teachers Association [HSTA] filed a grievance on behalf of the teacher pursuant to the relevant collective bargaining agreement [CBA]. Article V.G.2.f of the agreement provided that the arbitrator could enter an award in favor of the grievant if he or she determined that Employer's actions were improper. Here the arbitrator sustained the grievance, ruling that the State lacked just cause to terminate the teacher and awarded the teacher back pay and benefits.

The arbitrator ordered that Morita be restored to her position with back wages “with interest at the rate of ten (10) percent per annum on any unpaid amounts that are due and owing.” Ultimately HSTA sued DOE seeking the award of 10% interest on the back pay in the arbitration award and its fees.

The Supreme Court said that 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' [and] [t]his 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 entitle'” and that prejudgment interest is 'an element of complete compensation.'”

Among the issues raised by DOE's was its contention that the doctrine of sovereign immunity protected it from an arbitrator's award of prejudgment interest, the Supreme Court affirmed the Intermediate Court of Appeals [ICA] conclusion that the State waived its sovereign immunity in the arbitration proceedings.

In the words of the Supreme Court, "We hold that, under the facts of this case, it does not. Because judicial review of an arbitration award is confined 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 [DOE]. We also hold that the award of attorneys' fees and costs on appeal was proper."

* The Doctrine is reflected in the Eleventh Amendment to the United States Constitution which provides that "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." Thus a State cannot be sued in federal court without its consent or an expressed waiver of its immunity. Such immunity, however, is not viewed as being available to a political subdivision of a State.

The decision is posted on the Internet at: