Hawaii high court takes up 20-year fight over retiree health benefits

A class of roughly 100,000 former public employees returned to court in a case that has outlasted careers, mayoral terms and a chief justice.

by Jeremy Yurow, Court House News, March 2, 2026

HONOLULU (CN) — Twenty years after first filing suit, a class of roughly 100,000 Hawaii public retirees returned Monday to the Hawaii Supreme Court, asking for the third time whether the government broke a promise embedded in the state constitution.

The oral argument in Dannenberg v. State of Hawaii unfolded inside downtown Honolulu’s Aliʻiōlani Hale before an unusual bench. Three sitting justices had recused themselves, leaving Associate Justice Lisa Ginoza to preside alongside four circuit court judges temporarily assigned to hear the case.

The case focuses on a single sentence in the Hawaii constitution that declares the accrued benefits of public employees retirement system membership shall not be diminished or impaired. The retirees argue the state violated that protection when, beginning in 2003, it restructured health coverage and shifted thousands of dollars in additional costs to retirees through higher co-pays, deductibles and out-of-pocket maximums.

The state insists it did no such thing.

“There is nothing novel here. There are no new issues here,” said attorney David Louie of Kobayashi Sugita & Goda, defending the state.

The only question, he argued, is whether Oahu First Circuit Judge Jeffrey Crabtree correctly ruled that the plaintiffs didn’t prove their claims under the legal framework established in earlier rulings.

For the retirees, attorney Paul Alston of Dentons US framed the case in broader terms.

“On behalf of approximately 100,000 present and future retirees, and the estates of another 20,000 who died during the quarter-century covered by this case, we are here for the third time asking that you protect the rights of retirees under Article XVI, Section 2,” Alston said. Crabtree’s ruling, he added, collapses because it didn’t follow the analytical structure laid out by the high court.

The plaintiffs first filed suit in 2006. A decade later, in its landmark 2016 decision in Dannenberg , the Hawaii Supreme Court held that retiree health benefits are constitutionally protected and sent the case back for trial. That trial stretched over several years and ended in January 2024, when Crabtree ruled for the state and counties on all claims, awarding no damages.

Now the retirees are challenging nearly every aspect of that decision.

Their argument focuses on how courts determine whether benefits have been diminished. In 2016, the Hawaii high court drew from a line of Alaska Supreme Court decisions holding that if a benefit is reduced, any offsetting enhancement must accompany the reduction, relate to the specific benefit being cut and carry comparable economic value.

Crabtree, Alston argued, ignored the requirement that any offset be related to the benefit that was reduced.

Ginoza pressed him on whether that relatedness requirement was actually part of the 2016 holding or merely discussion of Alaska precedent.

Alston acknowledged the court did not adopt the Alaska framework word for word, but said its intent was clear.

“There is no hint in Dannenberg that it was adopting part, but not all, of the analysis,” he said.

Louie rejected that reading.

“This court is not a junior court to Alaska,” he said. “The Dannenberg opinion was a comprehensive, holistic evaluation process, well reasoned, well thought out. That gave a roadmap for the plaintiffs to follow, and said this is what you’re supposed to do.”

The retirees, Louie said, narrowly focused on increased cost-sharing while ignoring the broader picture: medical and prescription coverage did not shrink, coordination with Medicare reduced out-of-pocket costs for most retirees over 65 and the overall value of the benefits package increased over time.

The state is also seeking roughly $13 million in attorneys’ fees. Circuit Judge Peter Cahill questioned whether imposing those fees on the named class representatives could deter future public interest lawsuits.

“Chilling effect be damned?” Cahill asked. “That’s going to have a massive chilling effect on a very small group of people.”

Louie acknowledged the concern but maintained that fee exposure is inherent in contract litigation.

In rebuttal, Alston pointed to what he described as tangible evidence of success: internal documents showing that the health benefits trust fund stopped imposing further cost increases during the pendency of the litigation.

“We were able to stop them from continuing to increase retirees’ burden,” he said.

When justices asked what else the plaintiffs had achieved, Alston looked back to the state’s original position.

When the suit was filed, he said, state documents reflected a belief that retirees were entitled only to whatever coverage might qualify as reasonable, not the robust benefits then considered among the best in the country.

“We stopped them from further reducing benefits based on that belief,” Alston said. “We turned them around completely on that issue.”

The court did not indicate when it will rule.