Judges Lobby to Pause Hospital Privatization

by Nicholas Fillmore, Court House News, April 6, 2016

(CN) - A three-judge panel of the Ninth Circuit lobbied hard Wednesday for Hawaii to pause its plan to privatize money-pit hospitals on Maui and Lanai that would lead to 500 unionized workers losing their jobs.

House Bill 1075, signed into law by Gov. David Ige in August 2015, transfers day-to-day operations of Maui Memorial Medical Center and Kula Hospital and Clinic on Maui, and Lanai Community Hospital to health care giant Kaiser.

The United Public Workers, American Federation of State, County & Municipal Employees, Local 646, AFL-CIO sued Ige in August 2015 claiming that when he signed HB 1075 as Act 103 months earlier he violated the contract clause of the U.S. Constitution.

A federal judge refused the unions' request for an emergency stay in February, leading to Wednesday showdown in the Ninth Circuit before Circuit Judges A. Wallace Tashima, Barry Silverman and Susan Graber.

In his oral argument, union attorney Scott Kronland reiterated the union's position that the HB 1075 - which strips workers of civil service protection - violates the Constitution, which prohibits legislation that impairs an existing contract.

"In this case, the union has two existing contracts in place with the Hawaii Health Systems Corporation," Kronland said. "Not one-off contracts, but products of a mature bargaining relationship that's gone on for decades."

Leaning heavily on a 1998 arbitration decision that ruled in favor of the union, Kronland and Tashima hashed out the arbitrator's ruling, which concluded that the agreement was amended to protect the union from legislation.

Hawaii Attorney General Douglas Chin, arguing for Gov. Ige, characterized the unions' suit as an attempt to usurp the state's authority. Citing Kono v. Auer, Chin said that the Hawaii Supreme Court has said "the Legislature has the prerogative..." before Graber cut him off.

“Well it does, unless it violates the federal Constitution," Graber corrected, "which is the question we're here to decide."

She continued in another vein, "I really don't understand why this can't wait," a reference that privatization is scheduled to take place exactly one year to the day before the contract with the UPW expires.

In her ruling last month, U.S. District Judge Helen Gillmor of the District of Hawaii found that since the contract was finite anyway, its early termination posed no intrinsic impairment.

Chin took up the argument that the contract involves performance issues that are beyond the purview of the court. Graber took the opposite view, noting that while the matter of performance is an extrajudicial concern the issue at hand is the Constitution.

In a spirited back-and-forth with Chin, Graber insisted the court has jurisdiction to hear contract-clause cases filed against a state.

Changing tack, Chin argued that the Hawaii Legislature is currently considering legislation "that does exactly what UPW wants, giving them more credits or purchasing their time."

He added, "Some of the concerns that have occurred in testimony, and I'll be frank, it comes from the state, has to do if employees are being leased back to a private entity it could actually impact our employee retirement system, because of tax implications. "

Graber replied, "Well, the policy questions are separate and apart from what we have to decide here. What we have to decide here is if this is an ordinary contract-clause claim, and if you have passed a law that you are not authorized to pass because it impairs an obligation of contract."

Silverman returned to the subject of legislation, asking Chin, "Are you saying the Legislature might fix this?"

Chin answered, "I think that potential is there, and my suggestion to the court would be, in the court's absence of being able to decide this case because it is matters of state law, that there are avenues the UPW can seek."

Asked by Silverman if he would be willing to stay the case until the Hawaii judicial session ends in April, Chin balked.

"I don't think it's necessary in the sense that the court, according to us and to the lower court, doesn't have that sort of jurisdiction to be able to take on this case," he said, continuing on a theme.

"If the district court is wrong about that, what should we do?" Graber asked.

"We would ask the court not find that this provision is a corporation clause."

Tashima pressed the possibility of issuing a stay.

"If we stay, you win anyway, right?" Tashima asked.

"No. the Maui hospital system is losing $42 million, and shut down an adolescent psych ward at Valley Hospital in 2014," Chin said, adding the union was overstating the harm done to workers when compared to the harm inflicted. He also said he believes that Kaiser will reabsorb much of the workforce.

Undeterred, Silverman asked again why the case can't be stayed.

Chin suggested Judge Gillmor seemed to be leaning that way in delaying her written decision.

"She was being told, like we're being told, 'Well, the Legislature is working on a possible solution," Silverman said, looking at his colleagues on the bench.

Chin answered, "That's right, and she eventually decided there was no federal question. Our claim is that, in terms of whether privatization is allowed, under Kono and under UPW v. Abercrombie, the correct venue is in state court."

Graber noted that the 2002 arbitration included a ban on privatization, to which Chin replied, "We are asking this court to not perpetuate a decision that was made by an arbitrator who is not a federal judge--"

Graber cut in, "Bargaining history is never made by federal judges," Graber said. "It's made by the people who bargain and by arbitrators who interpret the contract for the parties."

Chin said Hawaii was not allowed to respond to the arbitration.

"We have always taken the position that [the legislation] means exactly what it says," Chin said. "I would strongly urge the court not to take the plain meaning of that sentence and turn it into something else."

Kronland, who preserved three minutes of his time for rebuttal, concluded: "The governor is not supporting fixing the problem, and if the court does not rule that this law violates the contract clause, the problem might not get fixed."

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