Flawed class-action lawsuit was a waste of money

THE ISSUE The state Supreme Court has rejected claims made in a class-action lawsuit against Hawaii's child-support agency.

CONTROVERSY about unintended pots of money and hundreds or thousands of victims can be blinding fodder for class-action lawsuits. Finding a single victim to act as the named plaintiff can be difficult, and an expensive lawsuit ordered dismissed this week by the state Supreme Court is an extreme example of misdirected claims.

The controversy occurred in 1998, after the state Child Support Enforcement Agency installed a computerized system for collecting payments from noncustodial parents and disbursing them for child support. Experiencing glitches in the new system, the agency suddenly was receiving 2,500 phone calls a day, and caseworkers became overwhelmed.

State Auditor Marion Higa criticized the agency for "longstanding weaknesses in its financial management." Since then, the agency has hired a certified public accountant as its financial officer, and the Supreme Court said its finances have "improved significantly."

Ann Kemp was among the parents whose initial checks from the agency came late -- two months instead of the two days by which they are supposed to be mailed to comply with state law. All payments to her since then have been prompt.

The money pot consisted of payments that were returned to the agency for being mailed to the wrong address and those that were not cashed within the checks' 90-day validity. By 2002, the agency had $3.6 million on "hold," the court said, because of wrong addresses or uncashed checks, although a plaintiff's expert testified that up to $9 million had somehow disappeared in the agency's accounting system.

No parent claiming they had not received money because of a wrong address or that they had received the check after it became invalid was named as a plaintiff or came forward in the case. Kemp's attorneys suggested the unclaimed money be given to the Legal Aid Society of Hawaii.

Overturning a decision by Circuit Judge Sabrina McKenna, the high court ruled that the claim of those in "the 'uncashed check' and 'bad address' category was inherently dissimilar to Kemp's claim," so she could not be a legitimate named plaintiff in a class-action lawsuit embracing that category.

Not only did the court put the money pot outside her attorneys' reach, it upheld McKenna's ruling that the agency could not be made to pay the piddling amount in interest on the initial payments to Kemp that accrued during her two-month wait in 1998.

The justices deservedly reduced to a footnote its decision upholding McKenna's ruling that Kemp has a right to the child-support payments that the agency forwards to her. They added that the agency has a fiduciary duty to put them in the mail within two days.

Perhaps most important, having ruled against the Kemp claims in every other respect, it also overturned McKenna's order that the state pay her lawyers a half- million dollars for attorney fees and costs.