Lales v. Wholesale Motors Company.Â

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Electronically Filed
Supreme Court
SCWC-28516
13-FEB-2014
09:28 AM

IN THE SUPREME COURT OF THE STATE OF HAWAI#I

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GERARD R. LALES, Respondent/Plaintiff-Appellant,

vs.

WHOLESALE MOTORS COMPANY, dba JN AUTOMOTIVE GROUP, JOHNNY
MARTINEZ, and GARY MARXEN, SR., Petitioners/Defendants-Appellees.

SCWC-28516

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 28516; CV. NO. 03-1-2415)

FEBRUARY 13, 2014

RECKTENWALD, C.J., NAKAYAMA, AND McKENNA, JJ.,
CIRCUIT JUDGE BROWNING, ASSIGNED IN PLACE OF POLLACK, J.,
RECUSED, WITH ACOBA, J., CONCURRING AND DISSENTING SEPARATELY

OPINION OF THE COURT BY RECKTENWALD, C.J.

Gerard R. Lales filed a civil complaint against his

former employer and supervisors for discriminatory conduct he
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allegedly suffered while employed as a car salesman.1 Lales

alleged that he was subjected to derogatory comments about his

French national origin, and that he was terminated because he

complained about the discriminatory conduct. Lales alleged state

harassment and retaliation claims, federal harassment and

retaliation claims, unlawful termination as against public

policy, and breach of his employment contract. All of the claims

were alleged against each of the Defendants. Defendants asserted

that Lales was not discriminated against during his employment,

and that he was terminated because he lied to a customer.

The circuit court granted summary judgment in favor of

Defendants. On appeal, the Intermediate Court of Appeals vacated

in part and affirmed in part, and remanded to the circuit court

for further proceedings. Lales v. Wholesale Motors Co., No.

28516, 2012 WL 1624013 (Haw. App. May 9, 2012). Specifically,

the ICA vacated the circuit court’s grant of summary judgment in

favor of the employer and one of Lales’s supervisors on the state

harassment and retaliation claims, and vacated the grant of

summary judgment in favor of the employer on the federal

harassment and retaliation claims, as well as the public policy

1
Lales was formerly employed by Wholesale Motors Company, dba JN
Automotive Group (JN), and his former supervisors were Johnny Martinez and
Gary Marxen, Sr. The employer and supervisors are referred to collectively as
“Defendants.”

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claim. The ICA affirmed the circuit court’s grant of summary

judgment on the remaining causes of action.2

As set forth below, we affirm in part and vacate in

part the judgment of the ICA. Specifically, we conclude that

individual employees are not liable as “employers” under HRS

§§ 378-2(1)(A) and 378-2(2). Accordingly, we vacate the ICA’s

judgment on COAs 1 and 2, with respect to supervisor Marxen, and

affirm the circuit court’s grant of summary judgment in favor of

Marxen on those causes of action.

We affirm the ICA’s judgment with respect to the

remaining causes of action. Specifically, with regard to the

federal harassment claim against JN, we conclude that the

affirmative defense set forth in Faragher v. City of Boca Raton,

524 U.S. 775 (1998), does not support summary judgment because

there remain issues of material fact as to whether JN’s actions

culminated in Lales’s termination. We also take this opportunity

to clarify that the Faragher affirmative defense is not

applicable under Hawaii’s anti-discrimination laws because the

administrative rules of the Hawai#i Civil Rights Commission hold

employers strictly liable for the discriminatory conduct of their

agents and supervisory employees. Finally, we conclude that

there were genuine issues of material fact regarding whether JN’s

proffered reasons for Lales’s termination were pretextual, that

2
As discussed infra note 9, the ICA’s affirmance on these causes of
action has not been challenged. Accordingly, we do not address them.

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Lales produced sufficient evidence to raise genuine issues of

material fact as to his state and federal harassment and

retaliation claims, and that the basis for Lales’s public policy

claim is not clear from the record.

I. Background

The following factual background is taken from the

record on appeal.

A. Discrimination Complaints

Lales filed a discrimination complaint against his

employer, JN, and his supervisor, Marxen, with the Equal

Employment Opportunity Commission (EEOC). In a declaration

attached to his complaint, Lales alleged that he was employed as

a salesperson with JN Chevrolet from July 18, 2001, until

June 23, 2002. During that time, Lales alleged that he was

subject to derogatory remarks based on his French national origin

by his supervisor Marxen, other supervisors, and co-workers. For

example, Lales alleged the following:
Gary Marxen, the General Sales Manager, called me
Frenchy[], and he wanted that name on my business
card. I protested, however I was called “Frenchy” on
a daily basis by Gary Marxen, other supervisors and
co-workers. Gary Marxen frequently referred to me as
a “french bastard”, and told me to go back to my
country because America does not need French people.
. . .
Gary Marxen told Johnny Martinez, a salesperson
who started at about the same time I did, “to go and
kick the ass of that French bastard.” Johnny Martinez
repeatedly harassed me by calling me “Frenchy” and
telling me that “the French are useless bastards”. I
complained about Johnny Martinez’ derogatory remarks
and threats.
Johnny Martinez was promoted to Sales Manager in
approximately November, 2001. Despite my complaints

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about his discrimination and harassment I was
transferred to his sales team. I told Gary Marxen
that I opposed this transfer. He responded by saying,
“fuck you, you French mother fucker, then you are
fired.” I did not want to lose my job so I remained
on Johnny Martinez’ sales team. While on his sales
team Johnny Martinez continued to harass me and
discriminate against me. I protested the
discrimination and harassment and months later was
allowed to transfer to Carlton Hill’s team. On April
2, 2002 Johnny Martinez threatened my [sic] me. At
the time of this threat Johnny Martinez had just
returned from a suspension for threatening an
electrician who worked on property. He was again
suspended for threatening me.
In late May, Johnny Martinez again threatened
me. I told Gary Marxen and Johnny Martinez that I was
going to contact my lawyer. After I threatened to
contact a lawyer, Johnny Martinez was terminated.
Shortly after Johnny Martinez’[s] termination I
was transferred to Joey Dempsey’s sales team. Joey
Dempsey was a friend of Johnny Martinez. On my first
day on his team Joey Dempsey told me that he was going
to get me fired. I was terminated about 3 days later.
I was terminated on June 23, 2002.

The EEOC issued a “determination as to the merits of

the subject charge” (EEOC Determination). The EEOC determined

that it was unable to conclude that Lales was discharged in

retaliation for opposing discrimination in the workplace, but

that “there [was] reasonable cause to believe that [JN]

discriminated against [Lales] because of his national origin.”

The EEOC also transmitted the complaint to the HCRC.

The HCRC subsequently issued Lales a “Notice of

Dismissal and Right to Sue” letter (Right to Sue Letter). The

Right to Sue Letter informed Lales of his right to “file a

private lawsuit against the Respondent in the State [c]ircuit

[c]ourt[.]”

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B. Circuit Court Proceedings

Lales filed a civil complaint in the circuit court

against Defendants. He subsequently filed an amended complaint,

asserting six causes of action (COA) against Defendants: (1)

“discriminatory acts” in violation of Hawai#i Revised Statutes

(HRS) chapter 378 (COA 1 or state harassment claim); (2)

retaliatory discharge in violation of HRS chapter 378 because

Lales filed a discrimination complaint (COA 2 or state

retaliation claim); (3) breach of the employment contract (COA 3

or employment contract claim); (4) unlawful termination as

against public policy (COA 4 or public policy claim); (5)

“discriminatory acts” in violation of section 703 of Title VII of

the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e-23

(COA 5 or federal harassment claim); and (6) retaliatory

discharge for opposing Defendants’ harassment in violation of

3
42 U.S.C. § 2000e-2(a)(1) provides:

(a) Employer practices
It shall be an unlawful employment practice for an
employer --

(1) to fail or refuse to hire or to discharge any
individual, or otherwise to discriminate against any
individual with respect to his compensation, terms,
conditions, or privileges of employment, because of
such individual’s race, color, religion, sex, or
national origin[.]

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section 704(a) of Title VII, 42 U.S.C. § 2000e-3(a)4 (COA 6 or

federal retaliation claim).

1. Marxen’s motion for summary judgment

Marxen filed a motion for summary judgment and argued,

inter alia, that Lales did not obtain a Right to Sue Letter

against Marxen.5 Marxen asserted that the EEOC Determination and

the Right to Sue Letter did not mention or refer to Marxen as a

party, nor did Marxen receive notice that he was a party to the

complaint. In the alternative and citing Maizner v. State of

Hawai#i Department of Education, 405 F. Supp. 2d 1225 (D. Haw.

2005), Marxen asserted that HRS chapter 378 precluded Lales from

filing suit against individuals.

4
42 U.S.C. § 2000e-3(a) provides:

(a) Discrimination for making charges, testifying,
assisting, or participating in enforcement proceedings

It shall be an unlawful employment practice for an
employer to discriminate against any of his employees
or applicants for employment, for an employment
agency, or joint labor-management committee
controlling apprenticeship or other training or
retraining, including on-the-job training programs, to
discriminate against any individual, or for a labor
organization to discriminate against any member
thereof or applicant for membership, because he has
opposed any practice made an unlawful employment
practice by this subchapter, or because he has made a
charge, testified, assisted, or participated in any
manner in an investigation, proceeding, or hearing
under this subchapter.
5
Martinez also filed a motion for summary judgment, arguing that
Lales failed to exhaust his administrative remedies by not obtaining a Right
to Sue Letter against Martinez. The circuit court granted summary judgment in
favor of Martinez, and this ruling was not challenged on appeal or on
certiorari.

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Attached to Marxen’s motion for summary judgment was

his declaration, in which he stated, inter alia, that he was JN’s

General Car Sales Manager and that his duties included “hiring

and firing of sales personnel, evaluation of sales personnel and

managing sales personnel.” Marxen stated that Lales was not

subject to discrimination or retaliation based on national

origin, Lales was transferred from Martinez’s sales team because

of a “personality conflict,” and Lales had not submitted any

written complaints or made any oral complaints alleging

discrimination or harassment. Marxen further stated that Lales

referred to himself as “Frenchy,” and asked and encouraged others

to do the same. Marxen also stated the following:
8. [] Lales received his termination notice on June
23, 2002 for missing a mandatory sales meeting
and lack of production in sales. Thereafter, []
Lales approached me and pleaded to keep his
employment promising he could improve his sales
figure. Based upon his representations, I
withdrew the termination notice.
9. [] Lales sold a vehicle to [customers] that did
not have air conditioning but [] Lales
represented to the [customers] that the vehicle
did come with air conditioning.
10. On June 24, 2002, [] Lales’[s] termination was
reinstated after an investigation revealed that
[] Lales was told the vehicle he sold did not
have air conditioning but he misrepresented to
the customers that it did. The termination
notice was changed to reflect the June 24, 2002
termination date and reason for termination as
lying to a customer.

Various exhibits were also attached to Marxen’s motion

for summary judgment. Attached as Exhibit D was Lales’s Response

to Defendants’ Request for Admissions, in which Lales admitted

that, while employed by JN, he used the nickname “Frenchy” when

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referring to himself, referred to himself as “Frenchy” in written

documents, and he did not submit any written complaints of

discrimination or harassment by co-workers or management based

upon his national origin.

Attached as Exhibit E to Marxen’s motion for summary

judgment was a copy of the Termination Report dated June 23,

2002, in which Lales was dismissed from the company for “missed

training meeting - 6/17/02” and “lack of production.” Attached

as Exhibit F was a copy of the June 23, 2002 Termination Report

that had been subsequently re-dated June 24, 2002, and that had

additional comments: “lied to customer and the Used Car Manager[]

causing us to install air conditioning[.]”

Lales filed a memorandum in opposition to Marxen’s

motion. Lales conceded that Marxen could not be held

individually liable under Title VII, but that pursuant to HRS

§§ 378-1 and 378-2 and Hawai#i case law, he was allowed to file

discrimination and retaliation complaints against Marxen

individually. Attached to the memorandum in opposition was

Lales’s declaration, in which he stated, inter alia:
5. . . . Marxen referred to me as “fucking French
bastard,” “Frenchie,” made derogatory remarks
about French people, told . . . Martinez to
“beat my fucken French ass,” and made remarks
about French people. I was also subjected to
ancestry harassment by [] Martinez and other
employees at my workplace . . . . During my
work at [JN], someone placed feces on my car,
for which a police report was made.
6. [] Martinez was my immediate supervisor and
referred to me as “French fries,” “Pepe Le
Pieu,” I was told that I stink, that French

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women are just whores, “French are whimps [sic]”
and other derogatory remarks. I asked to be
transferred because of [] Martinez’s behavior
towards me which included threats.
. . . .
10. I was told I could participate in [a] radio
show, however, this was stopped by [] Marxen who
said he did not want my French accent on the
radio to sell American cars.
. . . .
12. I was terminated for false reasons, specifically
that I did not sell enough vehicles. This is
untrue. The sales statistics show that I did
not have the lowest sales at the time of my
termination.
13. I was not told I was terminated for selling a
truck which did not contain air conditioning to
a customer. I did not see the termination
notice . . . and did not sign that notice. I
deny that I told the customer the truck had air
conditioning.
14. I was told I was terminated for not attending a
meeting. However, I was not aware of a sales
meeting and did not recall receiving notice
concerning this meeting. I have not known
anybody to be terminated for not attending a
sales meeting.
15. Before I was terminated, I complained orally to
[] Marxen that I did not appreciate the remarks
made concerning my ancestry. I also complained
to my co-workers and others. I even sought
advice from an attorney . . . about the hostile
work environment and anti-discrimination on the
basis of ancestry.

The circuit court subsequently granted summary judgment

in favor of Marxen. The circuit court stated that, with regard

to the federal discrimination and retaliation claims (COAs 5 and

6), Lales conceded that suit against individuals was

“impermissible.” As to COAs 1-4, the circuit court determined

that Lales did not receive a Right to Sue Letter against Marxen

because Marxen was not mentioned in the HCRC’s right to sue

letter.

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2. JN’s motion for summary judgment

JN also filed a motion for summary judgment. JN argued

that it was entitled to summary judgment on Lales’s retaliation

claims (COAs 2 and 6) because there was a strong inference that

JN had no discriminatory motive, and Lales could not produce any

evidence that he was engaged in a protected activity.6 JN also

argued that it was entitled to summary judgment on Lales’s

discrimination claims (COAs 1 and 5) because Lales failed to

provide evidence that he was subjected to unwelcome verbal or

physical conduct based on his national origin, Lales did not

follow JN’s procedure for filing harassment complaints, and there

was no evidence that Lales suffered any injury because of the

alleged discriminatory actions. Finally, JN asserted that it was

entitled to summary judgment on Lales’s breach of contract claim

(COA 3) because it had no knowledge of the alleged discriminatory

conduct. Although JN requested summary judgment as to all COAs,

it did not provide any arguments to support summary judgment on

the public policy claim (COA 4).

6
As explained further infra, Title VII and HRS § 378-2 protect an
employee from discriminatory retaliation. As this court noted in Schefke v.
Reliable Collection Agency, 96 Hawai#i 408, 425-26, 32 P.3d 52, 69-70 (2001),
retaliation claims are subject to a burden shifting analysis, in which: (1)
the plaintiff must first establish a prima facie case of retaliation by
showing that (a) he or she was engaged in a protected activity, (b) his or her
employer subjected the employee to an adverse employment action; and (c) a
causal link existed between the protected activity and the adverse action; (2)
the burden then shifts to the defendant to articulate a legitimate
nondiscriminatory reason for its decision; and (3) the burden then shifts back
to the plaintiff to demonstrate that the defendant’s offered reason for its
action was pretext for a discriminatory motive.

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JN attached to its motion for summary judgment the

declarations of several of its employees and numerous exhibits.

The declarations and exhibits set forth a version of the work

environment and the events that led to Lales’s termination that

differed from the facts set forth in Lales’s declaration.

Several individuals declared that Lales introduced himself, and

requested that he be called, by the nickname “Frenchy.” Marxen’s

son, the Used Vehicle Manager for JN, declared that he

specifically asked Lales, before Lales sold the truck to the

couple, whether Lales had informed the couple that the truck did

not have air conditioning. Lales responded that he told the

customers that the truck did not come with air conditioning.

According to the declarations of Marxen, two Assistant Sales

Managers, and the deposition of the husband, the couple returned

the day following their purchase and demanded that JN provide air

conditioning based on Lales’s assurances.

Attached as Exhibit Q to JN’s motion for summary

judgment was Lales’s amended response to the request for

admissions, wherein Lales admitted that, while employed by JN, he

did not submit any written complaints to JN regarding people

calling him “Frenchy” instead of Alex or Gerard, and he requested

to be transferred to another sales team because he had a

personality conflict with Martinez.

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Lales filed a memorandum in opposition to JN’s motion

for summary judgment. Lales argued that he established a prima

facie case of retaliatory termination and that he raised facts

that supported an inference that JN’s proffered reason for his

termination was pretext. Lales also asserted that summary

judgment was not warranted because he presented material issues

of fact in regard to his claim of harassment. Specifically,

Lales pointed to his own declaration, in which he asserted that

he was subjected to derogatory remarks and slurs about his French

ancestry and national origin by JN employees. In addition, Lales

argued that he presented material issues of fact that he suffered

damages and that he should be awarded punitive damages for JN’s

“egregious [and] outrageous” conduct. Lales did not contest the

dismissal of the breach of contract claim against JN.

Attached to Lales’s opposition was his declaration,

which relayed facts substantially similar to those in the

declaration he submitted in opposition to Marxen’s motion for

summary judgment. In addition, Lales declared:
18. In late May 2003,[7] I verbally complained to []
Marxen about the harassment and [] Martinez
19. [] Marxen told me “You Fucking French Bastard,
get out of my office”. He told [] Martinez to
“beat his F****** French Ass”.
. . . .
24. On June 23, 2006, within a month after I
complained to [] Marxen, I was terminated for
false reasons, specifically that I did not sell

7
Lales was terminated in 2002; his reference to verbally
complaining to Marxen in 2003 and subsequent references to his termination in
2006 appear to be incorrect.

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enough vehicles by [] Marxen. This is untrue.
The sales statistics show that I did not have
the lowest sales at the time of my termination.
I was told I was terminated for not attending a
meeting. However, I was not aware of a sales
meeting and did not recall receiving notice
concerning this meeting. I have not known
anybody to be terminated for not attending a
sales meeting. After questioning these reasons,
[] Marxen changed his mind and allowed me to
continue to work.
25. On June 24, 2006, I was terminated and told to
leave for selling a Truck without air
conditioning in it. This reason is false. I
did not see nor sign the termination notice
dated June 24, 2006. I deny that I told the
customer the truck had air conditioning. The
sales agreement does not list that the Truck had
air conditioning. The Blue Book document given
to [the customer] show the Truck was sold “as
is”, without air conditioning.
26. Other employees told [the customer] that the
Truck had air conditioning in it and were not
fired.

Lales also attached numerous exhibits to his opposition

to JN’s motion for summary judgment. Attached as Exhibit 11 were

excerpts from Lales’s deposition. Lales stated that he

complained to Marxen approximately one month before he was

terminated that he was “really tired” of Martinez’s behavior

toward him, specifically, “the way he treated me, the way he

would almost on a daily basis threaten me physically to go to the

boneyard and retaliating against me on a daily basis.” The

following conversation occurred:
Q. What did Martinez do to retaliate against you?
A. To retaliate against me, Martinez would -– the
only way Martinez could pick on me was the way I
was different. I was different in the bunch. I
mean, I was a different person. I mean, I’m
French, and I was different. So he couldn’t
pick on me at my work, my attendance, so he
would pick on me the way I am. I’m French.
Q. Is there anything else you told [] Martinez?
A. Oh, I told [] Marxen that all this Frenchy thing
already, I was just . . . fed up with it. It

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had to stop. And not only that, [] Marxen
didn’t only tolerate this abuse, daily abuse to
me, he encouraged it.
Q. And you told [] Marxen that?
A. I did.
Q. Is there anything else you told [] Marxen?
A. Yes. I don’t recall at this time right now, but
we had a good 20 minutes. Martinez was present.
Q. [] Martinez was present?
A. Yes, he was.
Q. Okay. And what did [] Martinez say?
A. [] Martinez said you French bastard, F-you, F-
you, F-you, F-you. And . . . Marxen told []
Martinez to kick this French bastard ass.
Q. At the meeting?
A. Yeah, at that meeting one month before I got
retaliated[.]

In his deposition, Lales also discussed working on

Martinez’s sales team, and then stated that Paul Tucker, the desk

manager, transferred Lales to another team after Lales complained

about Martinez. Lales stated that he told Tucker that Martinez

was discriminating against him, harassing him, and physically

threatening him.

The circuit court granted JN’s motion and subsequently

entered its Final Judgment. The circuit court subsequently filed

an Amended Final Judgment, entering judgment in favor of

Defendants and against Lales on all of Lales’s COAs. Lales

appealed the Amended Final Judgment.

C. ICA Appeal

Lales’s Opening Brief raised five points of error,

three of which are relevant to his application. Lales argued

that the circuit court erred in granting summary judgment in

favor of Marxen because Lales had a Right to Sue Letter that

allowed him to file suit against Marxen for his discriminatory

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actions. Lales also contended that the circuit court erred in

granting summary judgment in favor of JN because the circuit

court: (1) viewed the evidence in the light most favorable to JN,

contrary to the legal standard of viewing evidence in the light

most favorable to the non-moving party; (2) “erroneously ruled

that when the same actor is both responsible for hiring and

firing of an employee, a strong inference arises that there was

no discriminatory motive”; and (3) erroneously applied the

affirmative defense set forth in Faragher v. City of Boca Raton,

524 U.S. 775 (1998), to Lales’s state harassment claim.

Specifically, Lales, citing HAR § 12-46-175, asserted that JN was

strictly liable for the discriminatory actions of its supervisory

employees.

In their Answering Brief, Defendants argued that the

circuit court properly granted summary judgment in favor of

Marxen because Marxen’s name was not contained in the HCRC’s

Right to Sue Letter. With regard to summary judgment in favor of

JN, Defendants contended that “the only evidence [Lales] could

produce to support his contentions was his own conflicting

testimony and inadmissible hearsay.” Defendants noted “numerous

discrepancies in [Lales’s] testimony[.]” Defendants also argued

that, contrary to Lales’s assertion, HRS chapter 378 does not

mandate that an employer be held strictly liable for harassment

by its supervisors. Defendants further argued that the circuit

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court properly granted summary judgment because there was no

breach of contract and there was no public policy violation.

On May 9, 2012, the ICA issued a memorandum opinion

vacating in part and affirming in part the circuit court’s Final

Amended Judgment. Lales, 2012 WL 1624013, at *1, *18. In regard

to the circuit court’s grant of summary judgment in favor of

Marxen on COAs 1 and 2 (state harassment and retaliation claims),

the ICA concluded that the HCRC’s Right to Sue letter was

sufficient to authorize Lales to file suit against Marxen.

Id. at *9. In addition, citing the plain language of HRS § 378-2

and the definition of “employer” in HRS § 378-1, the ICA

determined that “an individual employee, who is an agent of an

employer, can be held individually liable as an ‘employer.’”

Lales, 2012 WL 1624013, at **10-12. Moreover, the ICA noted that

employees are subject to individual liability when they aid and

abet prohibited discriminatory practices, as set forth in HRS

§ 378-2(3). Id. at *10. The ICA then cited with approval the

federal district court’s decision in Sherez v. State of Haw.

Dep’t of Educ., 396 F. Supp. 2d 1138, 1146-48 (D. Haw. 2005),

because Sherez offered a “persuasive” rationale that employees

could indeed be held individually liable for discriminatory

conduct. Id. at *11.

The ICA also cited cases from this court that “support

the conclusion that liability under HRS § 378-2 extends to

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employees in their individual capacity.” Lales, 2012 WL 1624013,

at *12 (citing Steinberg v. Hoshijo, 88 Hawai#i 10, 960 P.2d 1218

(1998); Sam Teague, Ltd. v. Haw. Civil Rights Comm’n, 89 Hawai#i

269, 275-77, 971 P.2d 1104, 1110-12 (1999); and Schefke, 96

Hawai#i 408, 32 P.3d 52). Thus, the ICA determined that Lales

was entitled to file suit against Marxen in his individual

capacity under HRS § 378-2, and therefore, the circuit court

erred in granting summary judgment in favor of Marxen on COAs 1

and 2. Lales, 2012 WL 1624013, at *12, *18.

The ICA then addressed the circuit court’s grant of

summary judgment in favor of JN. Id. at **13-18. With regard to

COA 1 (state harassment claim), the ICA determined that under HAR

§ 12-46-175, employers are strictly and vicariously liable when a

supervisor harasses an employee. Lales, 2012 WL 1624013, at

**13-15. The ICA then discussed the rule set forth in Faragher,

as applied to Title VII claims. Id. at **14-15. The ICA stated

that an employer may raise the Faragher affirmative defense only

when no tangible employment action is taken against an employee,

and noted that the defense requires that: (1) the employer

exercised reasonable care to prevent and correct any harassing

behavior, and (2) the employee unreasonably failed to take

advantage of any preventive or corrective opportunities provided

by the employer. Id. at **14. The ICA stated that because the

alleged harassment by Marxen did not culminate in Lales’s

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discharge, the Faragher affirmative defense did not apply. Id.

at **15. The ICA further stated that because the requirements

set forth in Faragher were not met in this case, there was no

need to address whether the affirmative defense would apply under

HRS chapter 378. Id. Finally, the ICA stated that the circuit

court erred in applying Faragher. Id.

The ICA then determined that when the evidence was

viewed in the light most favorable to Lales, the circuit court

erred in granting summary judgment in favor of JN on the state

and federal harassment claims (COAs 1 and 5), because “the

matters set forth in Lales’s declaration . . . established that

there were genuine issues of material fact regarding his

claims[.]” Id. at **15-16.

In regard to the circuit court’s grant of summary

judgment in favor of JN on COAs 2 and 6 (retaliation claims), the

ICA stated that, given the conflicting evidence of the parties,

which must be viewed in the light most favorable to Lales, there

was sufficient evidence to establish a prima facie case of

retaliation and that “Lales presented sufficient evidence to

establish genuine issues of material fact regarding whether JN’s

proffered reasons for Lales’s termination were pretextual.” Id.

at **16-17.

The ICA further determined that the circuit court erred

in granting summary judgment in favor of JN on COA 4 (public

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policy claim) because Lales was not given a fair opportunity to

respond inasmuch as JN did not address this claim in its motion

for summary judgment. Id. at *18. Additionally, the ICA noted

that “to the extent that Lales’s COA 4 is based on public policy

derived from the provisions of HRS [c]hapter 378, it would be

barred.” Id. However, the ICA determined that because the

substance of the public policy claim was “unclear,” and given

that it was remanding the case for further proceedings, it would

also vacate the circuit court’s grant of summary judgment in

favor of JN as to COA 4. Id.

Accordingly, the ICA vacated the circuit court’s

Amended Final Judgment to the extent that it entered summary

judgment in favor of Marxen on COAs 1 and 2, and entered judgment

in favor of JN on COAs 1, 2, 4, 5, and 6. Id. The ICA affirmed

the Amended Final Judgment on all other causes of action.8 Id.

The ICA remanded the case to the circuit court for further

proceedings. Id.

The ICA filed its Judgment on Appeal on July 6, 2012.

Defendants timely filed an application for writ of certiorari,

and raise the following questions:
I. Did the ICA make grave errors of fact by (1)
largely ignoring the evidence presented by

8
The ICA also affirmed the circuit court’s grant of summary
judgment in favor of: (1) Martinez on all COAs; (2) Marxen on COAs 3 through
6; and (3) JN on COA 3. Id. In addition, the ICA vacated the circuit court’s
award of attorney’s fees and costs in favor of Defendants. Id. These
determinations are not challenged on appeal to this court and thus, they are
not discussed further.

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[Defendants], and only viewing [Lales’s]
“evidence” in the light most favorable to him;
(2) relying on conflicting “evidence” and
uncorroborated self-serving statements submitted
by [Lales] in a sham declaration; and (3)
considering [Lales’s] other inadmissible
evidence[?]
II. Did the ICA err in concluding that individual
employees can be held liable as an employer
under HRS § 378-2(1) and (2) in reliance on
Sherez v. State of Hawai#i [Dep’t] of Educ., 396
F. Supp. 2d 1138 (D. Haw. 2005), which has not
been followed by the [United States District
Court] since the Ninth Circuit ruled to the
contrary in a memorandum decision in Lum v.
Kauai County Council, 358 Fed. Appx. 860, 862
(9th Cir. [] 2009)?
III. Did the ICA err by ignoring a substantial body
of federal law to the contrary when it concluded
that the Faragher affirmative defense cannot
apply where a supervisor’s harassment culminates
in tangible employment action?
IV. Did the ICA err when it concluded that [Lales]
had submitted sufficient evidence that the
reason for his firing was pretextual, because
the ICA evaluated whether the reason for
[Lales’s] termination was objectively correct
rather than whether the [Defendants] believed
that reason was correct?
V. Did the ICA err when it held that the [c]ircuit
[c]ourt should not have granted summary judgment
on Count 4?

(Formatting altered).

II. Standards of Review

A. Summary Judgment

“On appeal, the grant or denial of summary judgment is

reviewed de novo.” First Ins. Co. of Haw. v. A&B Props., Inc.,

126 Hawai#i 406, 413, 271 P.3d 1165, 1172 (2012) (citing Nuuanu

Valley Ass’n v. City & County of Honolulu, 119 Hawai#i 90, 96,

194 P.3d 531, 537 (2008)). Furthermore,
[S]ummary judgment is appropriate if the pleadings,
depositions, answers to interrogatories and admissions
on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact
and that the moving party is entitled to judgment as a
matter of law. A fact is material if proof of that

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fact would have the effect of establishing or refuting
one of the essential elements of a cause of action or
defense asserted by the parties. The evidence must be
viewed in the light most favorable to the non-moving
party. In other words, we must view all of the
evidence and inferences drawn therefrom in the light
most favorable to the party opposing the motion.

Id. at 413-14, 271 P.3d at 1172-73 (citation omitted).

B. Statutory Interpretation

“Statutory interpretation is a question of law

reviewable de novo.” First Ins., 126 Hawai#i at 414, 271 P.3d at

1173 (citation omitted).

III. Discussion

A. Marxen was not subject to individual liability under HRS
§§ 378-2(1)(A) and 378-2(2) for Lales’s state harassment and
retaliation claims (COAs 1 and 2)

The Defendants argue that Marxen was not subject to

individual liability for Lales’s state harassment claim (COA 1)

under HRS § 378-2(1)(A), or his state retaliation claim (COA 2)

under HRS § 378-2(2), because those sections do not impose

liability on individual employees.9 We agree. The legislature’s

inclusion of “agent” in the definition of “employer” under HRS

§ 378-1 did not signal an intent to impose liability on

individual employees. Instead, by using the term “agent,” the

9
We do not reach the issue of Marxen’s individual liability based
on HRS § 378-2(3). See dissenting opinion at 11-17. Lales did not allege –-
in either his Amended Complaint, responses to Defendants’ motions for summary
judgment, or appeal to the ICA –- that Marxen was individually liable under
HRS § 378-2(3), and therefore, any argument now raised is waived. See Kau v.
City & County of Honolulu, 104 Hawai#i 468, 474 n.6, 92 P.3d 477, 483 n.6
(2004) (“‘Legal issues not raised in the trial court are ordinarily deemed
waived on appeal.’” (quoting Ass’n of Apartment Owners of Wailea Elua v.
Wailea Resort Co., 100 Hawai#i 97, 107, 58 P.3d 608, 618 (2002))).

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legislature did nothing more than ensure that employers would be

liable for the discriminatory conduct of their agents.

Individual employees are therefore not personally liable as

“employers” for harassment and retaliation claims under HRS

§§ 378-2(1)(A) and 378-2(2).

It is well established that the “fundamental starting

point for statutory interpretation is the language of the statute

itself.” State v. Wheeler, 121 Hawai#i 383, 390, 219 P.3d 1170,

1177 (2009) (citation omitted). Where the statutory language is

plain and unambiguous, this court’s sole duty is to give effect

to its plain and obvious meaning. Id. As relevant here, HRS

§ 378-2 (Supp. 2002)10 provided the following:
It shall be an unlawful discriminatory practice:
(1) Because of race, sex, sexual orientation, age,
religion, color, ancestry, disability, marital
status, or arrest and court record:
(A) For an employer to refuse to hire or
employ or to bar or discharge from
employment, or otherwise to discriminate
against any individual in compensation or
in the terms, conditions, or privileges of
employment;
. . . .
(2) For any employer, labor organization, or
employment agency to discharge, expel, or
otherwise discriminate against any individual
because the individual has opposed any practice
forbidden by this part or has filed a complaint,
testified, or assisted in any proceeding
respecting the discriminatory practices
prohibited under this part;
(3) For any person whether an employer, employee, or
not, to aid, abet, incite, compel, or coerce the
doing of any of the discriminatory practices
forbidden by this part, or to attempt to do
so[.]

10
HRS § 378-2 has since been amended in ways that are not relevant
to the instant appeal. See 2009 Haw. Sess. Laws Act 1, § 2 at 793-95; 2011
Haw. Sess. Laws Act 34, § 4; 2011 Haw. Sess. Laws Act 206, § 2.

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Because HRS §§ 378-2(1)(A) and 378-2(2) clearly limit

liability for engaging in discriminatory conduct to an

“employer,” whether an individual employee — like Marxen — may be

held personally liable for conduct prohibited under those

sections turns on the definition of “employer.”

Section § 378-1 defines an “employer” as “any

person,[11] including the State or any of its political

subdivisions and any agent of such person, having one or more

employees, but shall not include the United States.” This

language is subject to two possible interpretations. Under the

first interpretation, an “employer” for purposes of HRS § 378-1

includes “any person . . . having one or more employees.” Under

this reading, the definition of “employer” does not encompass

individual employees.

A number of federal courts have adopted this reading

and have concluded that the reference to “any agent of such

person” in HRS § 378-1’s definition of “employer” does not extend

liability to individual employees under HRS §§ 378-2(1)(A) and

378-2(2). See, e.g., White v. Pac. Media Group, 322 F. Supp. 2d

1101, 1114 (D. Haw. 2004); Maizner v. Haw. Dep’t of Educ., 405 F.

Supp. 2d 1225, 1237-39 (D. Haw. 2005); Lum v. Kauai County

Council, Civ. No. 06-00068 SOM/LEK, 2007 WL 3408003, at *2-13 (D.

11
“‘Person’ means one or more individuals, and includes, but is not
limited to, partnerships, associations, or corporations, legal
representatives, trustees, trustees in bankruptcy, receivers, or the State or
any of its political subdivisions.” HRS § 378-1.

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Haw. Nov. 9, 2007), aff’d, 358 Fed. Appx. 860 (9th Cir. 2009).

However, Lales argues that HRS §§ 378-2(1)(A) and 378-

2(2) impose liability on an “employer,” and that HRS § 378-1

defines an “employer” as “any person . . . having one or more

employees” and “any agent of such person.” Thus, Lales argues

that Marxen — as an agent of JN — is considered an “employer” for

purposes of HRS § 378-1, and is therefore subject to personal

liability under HRS §§ 378-2(1)(A) and 378-2(2). A number of

federal courts have adopted Lales’s reading of HRS § 378-1 in

concluding that a supervisory employee, as an “agent” of his or

her employer, is a statutory “employer” who may be held

individually liable for his or her discriminatory conduct. See,

e.g., Black v. City & County of Honolulu, 112 F. Supp. 2d 1041,

1056-57 (D. Haw. 2000); Hale v. Publ’ns, Inc., 468 F. Supp. 2d.

1210, 1226-29 (D. Haw. 2006); Sherez v. State of Haw. Dep’t of

Educ., 396 F. Supp. 2d 1138, 1146-48 (D. Haw. 2005).

We respectfully reject that interpretation of

“employer” under HRS § 378-1. In our view, the legislature’s

inclusion of “agent” in the definition of employer did not signal

an intent to impose liability on individual employees. As set

forth below, the history of Hawaii’s employment discrimination

law and the legislature’s stated purposes in enacting that law

give no indication that the legislature intended to impose

liability on individual employees. Instead, the legislature’s

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use of the word “agent,” “simply represented an unremarkable

expression of respondeat superior — that discriminatory personnel

actions taken by an employer’s agent may create liability for the

employer.” Lissau v. S. Food Serv., Inc., 159 F.3d 177, 180 (4th

Cir. 1998) (quotation marks and citations omitted) (analyzing

analogous provision under Title VII of the Civil Rights Act).12

Because the definition of employer under HRS § 378-1 is

ambiguous, this court has various tools at its disposal to

determine its meaning, including: (1) examining the context with

which the ambiguous words, phrases, and sentences may be

compared, in order to ascertain their true meaning; (2)

considering the reason and spirit of the law, and the cause which

induced the legislature to enact it, in order to discover its

true meaning; and (3) rejecting every construction which leads to

an absurdity. See HRS § 1-15; Estate of Roxas v. Marcos, 121

Hawai#i 59, 68, 214 P.3d 598, 607 (2009).

We first note that section 378-1 should not be viewed

in isolation, but rather evaluated in the context of the entire

statute. See Ah Mook Sang v. Clark, 130 Hawai#i 282, 297, 308

P.3d 911, 926 (2013) (“[W]e must read statutory language in the

context of the entire statute and construe it in a manner

12
As the Supreme Court has stated, however, “such common-law
principles may not be transferable in all their particulars to Title VII.”
Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 72 (1986); Burlington Indus.,
Inc. v. Ellerth, 524 U.S. 742, 764 (1998) (same); Faragher v. City of Boca
Raton, 524 U.S. 775, 791-92 (1998) (same).

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consistent with its purpose.” (quotation marks and citation

omitted)). In this regard, elsewhere in HRS § 378-2 the

legislature explicitly and unambiguously provided for employee

liability, and in doing so recognized that “employers” and

“employees” are distinct categories. Specifically, the

legislature imposed aider-and-abettor liability on employees in

HRS § 378-2(3), which makes it an unlawful discriminatory

practice “[f]or any person, whether an employer, employee, or

not, to aid, abet, incite, compel, or coerce the doing of any of

the discriminatory practices forbidden by this part, or to

attempt to do so.” Thus, as the United States District Court

observed in White, “the legislature clearly knew how to include

employees within a statute’s scope and its failure to do so

explicitly throughout the statute suggests that employees are

only held liable for infractions under HRS § 378-2(3).” 322 F.

Supp. 2d at 1114 (quotation marks and citation omitted).

Moreover, the history of Hawaii’s employment

discrimination law, and the legislature’s stated purposes in

enacting that law, contain no indication whatsoever that the

legislature intended to impose liability on individual employees

other than in HRS § 378-2(3). To the contrary, the statute

appears to have been patterned on federal labor and employment

discrimination laws which do not provide for individual

liability.

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The legislature enacted Act 180 in 1963, which made it

unlawful: (1) “[f]or an employer to refuse to hire, or employ or

to bar or discharge from employment, any individual,” or “to

discriminate against any individual in compensation or in the

terms, conditions or privileges of employment” based on race,

sex, age, religion, color, or ancestry (predecessor to HRS § 378-

2(1)(A)); and (2) “[f]or any employer, labor organization or

employment agency to discharge, expel, or otherwise discriminate

against any person because he has opposed any practice forbidden

by this Act or because he has filed a complaint, testified or

assisted in any proceeding respecting the employment practices

and discrimination prohibited under this Act.” 1963 Haw. Sess.

Laws Act 180, § 1 at 223-24 (emphases added) (predecessor to HRS

§ 378-2(2)).

When the legislature adopted Act 180 in 1963, it did

not separately define “employer.” It is apparent, based on the

language set forth above, that the legislature sought only to

proscribe discriminatory harassment and retaliation by employers,

labor organizations, and employment agencies. This

interpretation is confirmed by the legislative history of the

statute, which states that the purpose of the bill was to make it

“unlawful for an employer to refuse to employ, to pay less wages

than other employees, to discharge an employee because of, or to

otherwise discriminate against a person by reason of his race,

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color, sex, national origin, or because such individual is

between the ages of 40 to 65 years of age.” H. Stand. Comm. Rep.

No. 31, in 1963 House Journal, at 591 (emphasis added); see also

H. Stand. Comm. Rep. No. 80, in 1963 House Journal, at 607

(same); S. Stand. Comm. Rep. No. 399, in 1963 Senate Journal, at

810 (same); S. Stand. Comm. Rep. No. 573, in 1963 Senate Journal,

at 866. There is no indication that in proscribing harassment

and retaliation by employers, the legislature also sought to

address the conduct of individual employees.

In contrast, at the same time the legislature made it

unlawful for employers to harass or retaliate against any

individual, the legislature explicitly stated that it was

unlawful for “any person whether an employer, employee or not, to

aid, abet, incite, compel or coerce the doing of any of the

practices forbidden by the Act, or to attempt to do so.” 1963

Haw. Sess. Laws Act 180, § 1 at 224 (emphasis added) (predecessor

to HRS § 378-2(3)). In other words, the legislature plainly

understood how to proscribe the conduct of individual employees,

and when it intended to do so, it did so explicitly and

unequivocally.

The following year, the legislature included a

definition of “employer,” which was defined as “any person having

one or more persons in his employment, [including] any person

acting as an agent of an employer, directly or indirectly.” 1964

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Haw. Sess. Laws Act 44, § 2 at 45 (predecessor to HRS § 378-1).

As relevant here, the legislative history indicates that the

purpose of the bill was “to provide definitions for certain

ambiguous terms used in said Act,” H. Stand. Comm. Rep. No. 358,

in 1964 House Journal, at 355, “in order to avoid administrative

and legal difficulties.”13 H. Stand. Comm. Rep. No. 455, in 1964

House Journal, at 381. There is no indication in the legislative

history, however, that by defining an employer as “any person

having one or more persons in his employment, [including] any

person acting as an agent of an employer,” the legislature also

sought to extend the coverage of the law’s harassment and

retaliation provisions to the acts of individual employees.

Indeed such an expansive definition of “employer” would be at

odds with the plain language of Act 180, which the legislature

had enacted just a year earlier. 1963 Haw. Sess. Laws Act 180, §

1 at 224.

In 1981, the legislature again amended the definition

of “employer” via Act 94, to read as it currently does. 1981

Haw. Sess. Laws Act 94, § 2 at 184-85. The legislature stated in

the bill that its purpose in amending the definition of

“employer” was “to extend coverage of Part I of [HRS chapter 378]

to employees of the State and local governments[.]” Id., § 1 at

13
In defining “employer,” the legislature intentionally excluded the
state and its political subdivisions. S. Stand. Comm. Rep. No. 442, in 1964
Senate Journal, at 504-05.

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184. This purpose is further explained in the legislative

history, which indicates that, in 1963, the legislature had

intended “to exclude the State and its political subdivisions

from the definition of ‘employer’ and instead to provide

government workers with protection against employment

discrimination under a separate law.” H. Stand. Comm. Rep. No.

549, in 1981 House Journal, at 1166. Because the legislature

never adopted such legislation, the legislature sought to

“[provide] the same protection against discrimination under State

law [], to public employees as is already provided to employees

in the private sector.” Id.; see also S. Stand. Comm. Rep. No.

653, in 1981 Senate Journal, at 1195; S. Stand. Comm. Rep. No.

1109, in 1981 Senate Journal, at 1363.

Based on this history of the definition of “employer”

under HRS § 378-1, and the legislature’s express proscription of

individual employee conduct under the aider-and-abettor provision

in HRS § 378-2(3), we conclude that in using the term “agent,”

the legislature did nothing more than ensure that employers would

be liable for the discriminatory conduct of their agents.

Federal cases interpreting Title VII of the Civil Rights Act of

1964 support this conclusion. As this court has noted, “the

federal courts’ interpretation of Title VII is useful in

construing Hawaii’s employment discrimination law.” Sam Teague,

Ltd. v. Haw. Civil Rights Comm’n, 89 Hawai#i 269, 281, 971 P.2d

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1104, 1116 (1999). “The federal courts have considerable

experience in analyzing these cases, and we look to their

decisions for guidance.” Furukawa v. Honolulu Zoological Soc.,

85 Hawai#i 7, 13, 936 P.2d 643, 649 (1997).

The federal courts’ interpretation of the definition of

“employer” under Title VII is relevant here because that

definition is substantially similar to the definition set forth

in HRS § 378-1. Specifically, 42 U.S.C. § 2000e, defines an

“employer” as “a person engaged in an industry affecting commerce

who has fifteen or more employees for each working day in each of

twenty or more calendar weeks in the current or preceding

calendar year, and any agent of such a person, but such term does

not include [] the United States[.]” 42 U.S.C. § 2000e (emphasis

added).

Federal court cases interpreting Title VII are also

instructive here because both Title VII and the legislature’s

original definition of employer were adopted in the same year —

1964 — and each definition of “employer” was substantially

similar to the definition of “employer” under the National Labor

Relations Act (NLRA). See 29 U.S.C. § 152(2). Indeed, the

definitional provisions of Title VII were patterned on those in

the NLRA. See, e.g., Meritor, 477 U.S. at 75 n.1 (Marshall, J.,

concurring) (“The remedial provisions of Title VII were largely

modeled on those of the [NLRA].”); Albermarle Paper Co. v. Moody,

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422 U.S. 405, 419 (1975) (noting that the backpay provision of

Title VII “was expressly modeled on the backpay provision of the

[NLRA]”); Low v. Hasbro, Inc., 817 F. Supp. 249, 250 (D.R.I.

1993) (noting that Title VII’s definitional provisions were

“based on the language of the National Labor Relations Act”).

Since 1947, the NLRA has provided that “[t]he term ‘employer’

includes any person acting as an agent of an employer, directly

or indirectly[.]” 29 U.S.C. § 152(2). Under the NLRA

“corporate officers have not been held personally accountable for

the corporation’s backpay liability absent circumstances

equivalent to those that would justify piercing the corporate

veil at common law.” See, e.g., Donovan v. Agnew, 712 F.2d 1509,

1512 (1st Cir. 1983) (citations omitted).

As relevant here, every federal court of appeals to

consider the issue has concluded that the inclusion of “agent” in

the definition of “employer” under Title VII “simply represented

an unremarkable expression of respondeat superior — that

discriminatory personnel actions taken by an employer’s agent may

create liability for the employer.” See Lissau, 159 F.3d at 180-

81 (internal quotation marks omitted) (citing cases from the

second, third, fifth, sixth, seventh, eighth, ninth, tenth,

eleventh, and D.C. circuits reaching the same conclusion). Given

the substantially similar definitions of “employer” under Title

VII and HRS § 378-1, we agree with these courts that by including

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the term “and any agent of such person” in the definition of

“employer,” the legislature sought only to impose liability on

employers for the discriminatory conduct of their agents.

Of course, we recognize that “federal employment

discrimination authority is not necessarily persuasive,

particularly where a state’s statutory provision differs in

relevant detail.” Furukawa, 85 Hawai#i at 13, 936 P.2d at 649.

Here, however, HRS chapter 378 and Title VII do not differ in

relevant detail. Although HRS chapter 378 reaches a broader

range of employers than Title VII, because HRS § 378-1 defines an

employer as “any person . . . having one or more employees,”

whereas 42 U.S.C. § 2000e defines an employer as “a person . . .

who has fifteen or more employees,” the fact that the legislature

sought to reach employers with as few as one employee does not

demonstrate that the legislature also sought to impose personal

liability on individual employees as “employers” under HRS

§§ 378-2(1)(A) and 378-2(2). To the contrary, in crafting HRS

chapter 378 it is clear that the legislature knew how to

proscribe the conduct of individual employees and did so

expressly when that was its intent. As noted above, HRS § 378-

2(3) makes it unlawful for an employee to aid, abet, incite,

compel, or coerce any discriminatory practice. The inclusion of

this subsection supports the conclusion that the legislature did

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not intend to impose personal liability on individual employees

as “employers” under HRS §§ 378-2(1)(A) and 378-2(2).

Nevertheless, Lales cites to several cases decided by

this court, which he asserts support a conclusion that individual

employees may be held liable under HRS §§ 378-2(1)(A) and 378-

2(2). However, this court has never squarely addressed the issue

of whether an individual employee is an “employer” under those

sections. For example, in Steinberg v. Hoshijo, 88 Hawai#i 10,

960 P.2d 1218 (1998), a female complainant, Linda Louise Gould,

filed a sexual harassment claim, under HRS § 378-2(1)(A), with

the Hawai#i Civil Rights Commission (HCRC) against her former

employer, Kailua Family and Urgent Medical Care (Clinic), and her

former supervisor, Dr. Harold Steinberg. Gould alleged that

during her employment with the Clinic, Dr. Steinberg subjected

her to unwelcome sexual conduct. Id. at 12, 960 P.2d at 1220.

The Clinic subsequently settled the claims against it, and was

dismissed from the case. Id. at 14, 960 P.2d at 1222. The HCRC

proceeded with the claim against Dr. Steinberg and found him

liable for sexual harassment. Id. at 11, 960 P.2d at 1219. The

circuit court affirmed the HCRC’s decision against Dr. Steinberg,

and Dr. Steinberg appealed to this court. Id. at 15, 960 P.2d at

1223. On appeal, this court affirmed the circuit court’s order.

Id. at 19, 960 P.2d at 1227. This court, however, did not

consider the issue presented in this case, expressly noting that

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“[t]he parties [did] not dispute that Dr. Steinberg was an agent

of the Clinic and therefore an ‘employer’ as defined by HRS

§ 378-1.” Id. at 18 n.10, 960 P.2d at 1226 n.10.

In Sam Teague, 89 Hawai#i 269, 971 P.2d 1104, a female

complainant, Yvette Shaw, filed a claim under HRS § 378-2(1)(A)

with the HCRC, alleging discrimination because of her sex.

Shaw’s claim named both Sam Teague, Ltd., and its president and

sole stockholder Sam Teague, and this court referred to both,

collectively, as “Employer.” After a contested case hearing, the

HCRC affirmed the hearings officer’s findings and conclusions,

finding that Employer had engaged in discriminatory practices.

Id. at 274, 971 P.2d at 1109. The circuit court affirmed the

HCRC’s decision and Employer appealed. Id. at 274-75, 971 P.2d

at 1109-10. Although this court noted that the HCRC had added

Teague, in her personal capacity, to the complaint “[b]ecause HRS

§ 378-1 [] defines ‘employer’ to include agents of persons having

one or more employees,” this court was not confronted with the

correctness of the HCRC’s determination in this regard. Id. at

276-77, 971 P.2d at 1111-12. Moreover, it is unclear what impact

the fact that Teague was the president and sole shareholder of

the two-person business, Sam Teague, Ltd., had on the HCRC’s

conclusion that Teague was an “employer” under HRS § 378-1.

Lastly, in Schefke v. Reliable Collection Agency, Ltd.,

96 Hawai#i 408, 32 P.3d 52 (2001), an employee, Charles Schefke,

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brought an action against his employer and its owners. Schefke

alleged, among other things, age discrimination claims under HRS

§§ 378-2(1)(A), 378-2(2), and 378-2(3). Id. at 417, 32 P.3d at

61. As relevant here, the circuit court granted the owners’

motion for a directed verdict as to their individual liability.

Id. at 419, 32 P.3d at 63. In concluding that the circuit court

erred in granting directed verdicts in favor of the owners,

however, it is not clear whether this court was addressing their

individual liability under HRS §§ 378-2(1) and (2), or under HRS

§ 378-2(3). Id. at 442, 32 P.3d at 86. Moreover, Schefke

involved discrimination claims against an employer and its

owners, and not an individual employee, as is the case here. Id.

at 415, 32 P.3d at 59. Accordingly, our holding that an

individual employee is not liable as an “employer” under HRS §§

378-2(1)(A) and 378-2(2) does not conflict with our precedent.

Finally, we note that generally, in the case of

ambiguous statutory language, “an agency’s interpretation of its

own governing statute requires this court to defer to the

agency’s expertise and to follow the agency’s construction of the

statute unless that construction is palpably erroneous.” Gillan

v. Gov’t Employees Ins. Co., 119 Hawai#i 109, 114, 194 P.3d 1071,

1076 (2008). Here, the HCRC has interpreted the definition of

“employer” under HRS § 378-1 to include supervisory employees.

See generally Santos v. Niimi, No. 92-001-E-SH (HCRC Nov. 4,

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1992) (Hearing Examiner’s Findings of Fact, Conclusions of Law

and Recommended Order), adopted by (HCRC Jan. 25, 1993) (Final

Decision and Order); Tseu v. Cederquist, Inc., No. 95-001-E-R-S

(HCRC Mar.13, 1996) (Hearings Examiner’s Findings of Fact,

Conclusions of Law and Recommended Order), adopted by (HCRC June

28, 1996) (Final Decision and Order); all available at

http://labor.hawaii.gov/hcrc/contested-case-decisions/. However,

for the reasons set forth above, the HCRC’s construction of HRS

§ 378-1 is palpably erroneous. The first HCRC decision on this

issue, Santos, relied on early federal court cases interpreting

Title VII that held the statute provided for individual

liability. See, e.g., Paroline v. Unisys Corp., 879 F.2d 100,

104 (4th Cir. 1989), vacated on other grounds, 900 F.2d 27 (4th

Cir. 1990); Hendrix v. Fleming Cos., 650 F. Supp. 301, 302-03

(W.D. Okla. 1986); Thompson v. Int’l Ass’n of Machinists &

Aerospace Workers, 580 F. Supp. 662, 668-69 (D.D.C. 1984); Watson

v. Sears, Roebuck Co., 742 F. Supp. 353, 357 (M.D. La. 1990).

However, as noted above, these cases have subsequently been

overwhelmingly rejected by the federal courts of appeals,

including the circuits in which those cases arose. See, e.g.,

Lissau, 159 F.3d at 180 (Fourth Circuit notes that “[a]n analysis

of Title VII’s language and its remedial scheme leads us to join

the other circuit courts and conclude that supervisors are not

liable in their individual capacities for Title VII

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violations.”); Haynes v. Williams, 88 F.3d 898, 901 (10th Cir.

1996) (“[W]e agree with the majority view that, taken as a whole,

the language and structure of amended Title VII continue to

reflect the legislative judgment that statutory liability is

appropriately borne by employers, not individual supervisors.”);

Gary v. Long, 59 F.3d 1391, 1399 (D.C. Cir. 1995) (“[W]hile a

supervisory employee may be joined as a party defendant in a

Title VII action, that employee must be viewed as being sued in

his capacity as the agent of the employer, who is alone liable

for a violation of Title VII.”); Grant v. Lone Star Co., 21 F.3d

649, 653 (5th Cir. 1994) (“[W]e conclude that individuals who do

not otherwise qualify as an employer cannot be held liable for a

breach of title VII.”). Moreover, since its inception in 1963,

Hawaii’s employment discrimination law has proscribed individual

employee conduct only to the extent that the employee aids,

abets, incites, compels, or coerces discriminatory conduct. HRS

§ 378-2(3). As explained above, there is no indication that the

legislature also sought to extend liability to individual

employees for harassment and retaliation claims under HRS §§ 378-

2(1)(A) and 378-2(2), respectively.

In sum, the legislature’s inclusion of “agent” in the

definition of “employer” under HRS § 378-1 did not signal an

intent to impose liability on individual employees. Instead, by

using the term “agent,” the legislature did nothing more than

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ensure that employers would be liable for the discriminatory

conduct of their agents. We therefore hold that Marxen was not

subject to personal liability under HRS §§ 378-2(1)(A) and 378-

2(2) for Lales’s state harassment and retaliation claims.

B. The circuit court erred in granting summary judgment in
favor of JN on the state and federal harassment claims (COA
1 and 5)

The Defendants contend that the circuit court did not

err in granting summary judgment in favor of JN on the state and

federal harassment claims (COA 1 and 5). With regard to both the

state and federal harassment claims against JN, the Defendants

argue that the ICA misconstrued the Supreme Court’s decision in

Faragher. In regard to the federal harassment claim, Lales

argues that the Faragher affirmative defense is not available in

this case because there was tangible employment action taken

against him, i.e., he was terminated. In regard to the state

harassment claim, Lales argues that HAR § 12-46-175(d) imposes

strict liability on employers for actions of their supervisory

employees, thus precluding application of the Faragher

affirmative defense under Hawai#i law. In reply, Defendants

argue that the HCRC overstepped its statutory authority in

enacting HAR § 12-46-175(d), and thus, this court should follow

federal precedent and recognize the Faragher affirmative defense.

As discussed below, the Court’s decision in Faragher,

while applicable to federal harassment claims, is not presently

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implicated in this case because there remains a question of

material fact as to whether JN’s alleged discriminatory actions

culminated in Lales’s termination. Moreover, the Faragher

affirmative defense is not applicable to Hawaii’s anti-

discrimination laws because the administrative rules impose

strict liability on employers for harassment on the basis of

ancestry by their agents and supervisory employees, and the HCRC

acted within the scope of its administrative authority in

enacting those rules.

1. Faragher Affirmative Defense

In Faragher, the plaintiff, Beth Ann Faragher, filed an

employment discrimination claim, pursuant to Title VII of the

Civil Rights Act of 1964, against her employer, the Parks and

Recreation Department of the City of Boca Raton (City), and her

immediate supervisors Bill Terry, David Silverman, and Robert

Gordon. 524 U.S. at 780-81. Faragher alleged that the City and

her immediate supervisors created a “sexually hostile atmosphere”

at work by subjecting her to, among other things, “uninvited and

offensive touching.” Id. The district court determined, in

relevant part, that the City could be held liable for the

harassment by its supervisory employees:
First, the court noted that the harassment was
pervasive enough to support an inference that the City
had “knowledge, or constructive knowledge,” of it.
Next, it ruled that the City was liable under
traditional agency principles because Terry and
Silverman were acting as its agents when they
committed the harassing acts. Finally, the court

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observed that Gordon’s knowledge of the harassment,
combined with his inaction, “provides a further basis
for imputing liability on [sic] the City.”

Id. at 783 (citations omitted).

On appeal to the Eleventh Circuit Court of Appeals, a

three-judge panel reversed the judgment against the City on the

ground that it was not appropriate to hold the City liable for

the supervisors’ conduct. Id. The Eleventh Circuit, sitting en

banc, adopted the panel’s conclusion. Id.

The United States Supreme Court granted certiorari and

determined that it was appropriate to hold an employer

vicariously liable for wrongful conduct of a supervisor when that

supervisor is using his or her supervisory authority. Id. at

786. However, the Court determined that imposing liability based

on the misuse of supervisory authority conflicted with its prior

ruling that an employer was not “automatically” liable for

harassment by a supervisor. Id. at 804 (citing Meritor, 477 U.S.

at 72). The Court, therefore, identified the circumstances under

which an employer could be held vicariously liable under Title

VII for the actions of its supervisory employees:
In order to accommodate the principle of
vicarious liability for harm caused by misuse of
supervisory authority, as well as Title VII’s equally
basic policies of encouraging forethought by employers
and saving action by objecting employees, we adopt the
following holding in this case and in Burlington
Industries, Inc. v. Ellerth, 524 U.S. 742 [] (1998),
also decided today. An employer is subject to
vicarious liability to a victimized employee for an
actionable hostile environment created by a supervisor
with immediate (or successively higher) authority over
the employee. When no tangible employment action is
taken, a defending employer may raise an affirmative

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defense to liability or damages, subject to proof by a
preponderance of the evidence, see Fed. Rule Civ.
Proc. 8(c). The defense comprises two necessary
elements: (a) that the employer exercised reasonable
care to prevent and correct promptly any sexually
harassing behavior, and (b) that the plaintiff
employee unreasonably failed to take advantage of any
preventive or corrective opportunities provided by the
employer or to avoid harm otherwise. While proof that
an employer had promulgated an antiharassment policy
with complaint procedure is not necessary in every
instance as a matter of law, the need for a stated
policy suitable to the employment circumstances may
appropriately be addressed in any case when litigating
the first element of the defense. And while proof
that an employee failed to fulfill the corresponding
obligation of reasonable care to avoid harm is not
limited to showing an unreasonable failure to use any
complaint procedure provided by the employer, a
demonstration of such failure will normally suffice to
satisfy the employer’s burden under the second element
of the defense. No affirmative defense is available,
however, when the supervisor’s harassment culminates
in a tangible employment action, such as discharge,
demotion, or undesirable reassignment. See
Burlington, 524 U.S.[] at 762-63[].

Faragher, 524 U.S. at 807-08.

In sum, the Court determined that when no tangible

employment action is taken against an employee, an employer can

assert an affirmative defense against a claim of discrimination

by one of its supervisors.14 However, the Court held that an

employer would be held strictly liable for the discriminatory

conduct of its supervisors if that conduct resulted in tangible

employment action against the employee.

14
The United States Supreme Court recently held that, for purposes
of holding an employer vicariously liable under Title VII, an employee must
show that the alleged discrimination was committed by a “supervisor,” which
the Court defined as an employee “empowered by the employer to take tangible
employment actions against the victim[.]” Vance v. Ball State Univ., 133 S.
Ct. 2434, 2439 (2013). In this case, it is undisputed that Marxen was a
“supervisor” insomuch as he had the authority to hire, reassign, and terminate
Lales. Accordingly, the Court’s decision in Vance does not affect our
holding.

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2. Summary judgment was not appropriate on Lales’s federal
harassment claim against JN because there remains an
issue of material fact as to whether the alleged
harassment culminated in Lales’s discharge

It is undisputed that the Faragher affirmative defense

applies to federal harassment claims. In their application, the

Defendants argue that the ICA “ignored the substantial body of

federal case law that permits the Faragher affirmative defense

even if there [was] tangible employment action.” See, e.g.,

Ferraro v. Kellwood Co., 440 F.3d 96, 102 (2d Cir. 2006) (“The

word ‘culminate’ requires that the tangible employment action be

linked to the supervisor’s discriminatory harassment. This

reading comports with the purpose of the test — to determine

whether ‘the supervisor’s misconduct has been aided by the agency

relation.’ If an official action taken by a supervisor is not

part of his discriminatory harassment, it provides no evidence

that the supervisor used his agency relation with the employer to

further his misconduct.”). Specifically, Defendants assert that

there was no evidence that the alleged harassment “culminated” in

Lales’s discharge.

Contrary to Defendants’ assertion, summary judgment

based on the Faragher defense was not appropriate in this case

because there existed issues of material fact as to whether the

alleged harassment by Marxen against Lales indeed culminated in

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Lales’s discharge.15 See, e.g., Bennett v. Progressive Corp.,

225 F. Supp. 2d 190, 204 (N.D.N.Y. 2002); EEOC v. Safelite Glass

Corp., No. 4:10-CV-102-F, 2012 WL 3266333, at *12-*13 (E.D.N.C.

Aug. 9, 2012) (holding that there were still genuine issues of

material fact as to whether the harassment “culminated” in the

employee’s termination).

In Bennett, a federal district court analyzed whether

to grant employer Progressive Corporation’s motion for summary

judgment on a Title VII sexual harassment claim brought by a

former employee, Janet Bennett. 225 F. Supp. 2d at 204. Bennett

alleged that her supervisor, Larry Mitchell, made unwelcome

comments about her and tried to have a sexual relationship with

her. Id. at 197. Mitchell allegedly increased Bennett’s

workload when Bennett refused his sexual advances, and forced

Bennett to drink alcohol while at work or on the job in an

attempt to get Bennett to have a physical relationship with him.

Id. at 198-99. Bennett did not report Mitchell’s actions until

nearly a year later, when she reported Mitchell’s conduct to

Michael Beney, Mitchell’s supervisor and personal friend. Id. at

197-200. Beney subsequently terminated Bennett and Mitchell for

15
Ferraro is not inconsistent with this determination. In Ferraro,
Laura Ferraro brought a discrimination claim against her employer under the
New York State Human Rights Law and New York City Human Rights Law. 440 F.3d
at 98. The United States Court of Appeals for the Second Circuit noted that
Ferraro did not dispute the availability of the Faragher affirmative defense,
and determined that the employer satisfied its summary judgment burden to show
that any alleged discriminatory conduct did not culminate in Ferraro’s
termination. Id. at 99-100, 102.

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consumption of alcohol on the job, which was against company

policy. Id. at 202. Bennett filed a discrimination and

retaliation lawsuit against Progressive, and Progressive filed a

motion for summary judgment arguing that it was not liable under

Title VII because it satisfied the affirmative defense set forth

in Faragher. Id. at 196, 202-10.

The federal district court analyzed, inter alia,

whether the sexual harassment culminated in Bennett’s

termination, and determined:
In the instant case, factual questions remain as to
the true reason for plaintiff’s termination. She
alleges that the hostile work environment Mitchell
created coerced her, against her will, into drinking,
and that such drinking was used as the reason for her
termination. She alleges that the real reason she was
fired was not due to a violation of the office alcohol
policy, but rather because she lodged a complaint
against Mitchell to Beney, and the company used her
violation of the alcohol policy as a convenient means
to head off any problems arising from the sexual
harassment complaint lodged against Mitchell.
Plaintiff alleges, and Mitchell does not deny, that
Beney was friends with Mitchell and his wife, citing,
among other things, Beney’s participation as an usher
in Mitchell’s wedding. As such, sufficient factual
disputes have been raised as to whether or not the
termination, in the end, was a culmination, or result,
of Mitchell’s harassment.

Id. 204-205.

Accordingly, the court denied summary judgment in light

of its holding that there were genuine issues of material fact as

to Bennett’s harassment claim under Title VII. Id. at 219.

Similarly, in the present case, Lales presented

sufficient evidence to raise an issue of material fact as to

whether the alleged discriminatory conduct “culminate[d] in

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tangible employment action” against Lales. For example, in his

declaration, Lales stated that he was subjected by Marxen to

derogatory remarks and slurs, such as being called “Frenchie,”

“fucking French Bastard,” and being told by Marxen that he could

not participate in a radio program where salespersons were

allowed to get on the radio and announce “slasher sales” of

vehicles because Marxen “did not want [Lales’s] French accent on

the radio to sell American cars.” Furthermore, Lales stated in

his declaration that Marxen told him to call himself “Frenchy”

and to put that name on his business card. Lales stated that he

did not put “Frenchy” on his business card because he found this

to be offensive. One month prior to his termination, Lales

reported Martinez’s discriminatory behavior to Marxen, and Marxen

responded, “You Fucking French Bastard, get out of my office[.]”

Lales said in his declaration that the initial reason given for

his termination on June 23, 2002, was poor sales performance and

missing a meeting. Upon confronting Marxen about JN’s rationale

for his termination, Marxen reinstated Lales. The next day,

June 24, 2002, Lales was again terminated, this time for

allegedly lying to a customer. The initial June 23, 2002

Termination Report was re-dated to reflect the new termination

date, June 24, 2002. Furthermore, in addition to the original

reason for Lales’s termination, the re-dated June 24, 2002

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Termination Report stated that Lales lied to customers and the

used car manager.

The instant case is analytically similar to Bennett.

Defendants argue that Lales was terminated because he lied to

customers. In contrast, Lales’s evidence is sufficient to raise

the inference that Lales was subjected to a course of

discriminatory conduct by Marxen that culminated in Lales’s

discharge, with the alleged lie to the customers serving as a

“convenient means” for Lales’s termination. Id. at 204-04. That

conduct allegedly began with Marxen’s use of derogatory remarks

toward Lales, then continued with Marxen’s alleged rejection of

Lales’s complaint to him approximately one month before Lales’s

termination (which was itself allegedly accompanied by another

such remark), and culminated with Lales’s termination only one

day after an aborted attempt by Marxen to terminate him for

missing a sales meeting and poor sales performance. These

alleged circumstances are sufficient to raise the inference that

Marxen utilized his authority as a supervisor to further his

alleged discriminatory animus toward Lales by terminating him

after he complained — a situation to which the Faragher defense

would not apply. Cf. Ferraro, 440 F.3d at 102 (“If an official

action taken by a supervisor is not part of his discriminatory

harassment, it provides no evidence that the supervisor used his

agency relation with the employer to further his misconduct.”).

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Because there is an issue of material fact as to

whether Marxen’s harassment culminated in Lales’s discharge, the

circuit court erred in granting summary judgment in favor of JN

on the federal harassment claim (COA 5).16

3. Summary judgment was not appropriate on Lales’s state
harassment claim against JN because HAR § 12-46-175(d)
imposes strict liability on an employer for the
discriminatory conduct of its supervisory employees

Lales argues that the Faragher affirmative defense is

not applicable to the state harassment claim because HAR § 12-46-

175(d) imposes strict liability on employers for actions of their

supervisory employees. Defendants, however, argue that the HCRC

overstepped its statutory authority in enacting HAR § 12-46-

175(d), and thus, the Faragher affirmative defense should be

adopted.

As explained below, HAR § 12-46-175(d) does not

contradict or conflict with HRS chapter 378, and the HCRC did not

overstep its statutory authority in imposing strict liability on

employers for the discriminatory actions of their supervisors.

Therefore, the Faragher affirmative defense is not applicable to

the state harassment claim.

16
The ICA determined, “Here, because the alleged harassment by
Marxen did culminate in Lales’s discharge, the Faragher affirmative defense
did not apply.” Lales, 2012 WL 1624013, at *15. To the extent this statement
appears to resolve a factual dispute, it would not be proper in reviewing a
motion for summary judgment. See Rodriguez v. Nishiki, 65 Haw. 430, 439, 653
P.2d 1145, 1151 (1982) (“It is not within the province of the trial court at
summary judgment to resolve factual disputes.”). Nevertheless, the ICA did
not err in vacating the circuit court’s grant of summary judgment on the
harassment claims (COAs 1 and 5) because Lales provided sufficient evidence to
raise a genuine issue of material fact.

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Pursuant to statutory authority, see HRS § 368-3(9)

(Supp. 2002) (noting that the HCRC has the authority to “adopt

rules under chapter 91”), the HCRC adopted HAR § 12-46-175, which

provides, in relevant part:
(d) An employer is responsible for its acts and
those of its agents and supervisory employees
with respect to harassment on the basis of
ancestry regardless of whether the specific acts
complained of were authorized or even forbidden
by the employer and regardless of whether the
employer knew or should have known of their
occurrence. The [HCRC] will examine the
circumstances of the particular employment
relationship and the job functions performed by
the individual in determining whether an
individual acts in a supervisory or agency
capacity.
(e) With respect to conduct between fellow
employees, an employer shall be responsible for
acts of harassment in the workplace on the basis
of ancestry, where the employer, its agent, or
supervisory employee, knows or should have known
of the conduct, unless the employer can show
that it took immediate and appropriate
corrective action.

(Emphasis added).

HAR § 12-46-175 provides the requirements for an

ancestry harassment claim, and specifically distinguishes between

supervisory liability and co-worker liability. See HAR §§ 12-46-

175(d) and (e). On one hand, HAR § 12-46-175(d) imposes strict

liability on employers for actions of their supervisory employees

for ancestry harassment, regardless of whether the acts were

forbidden or whether the employer knew about this conduct. On

the other hand, HAR § 12-46-175(e) imposes liability for conduct

between fellow employees only if the employer, its agents, or

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supervisory employees knew or should have known of the

harassment.

“It is axiomatic that an administrative rule cannot

contradict or conflict with the statute it attempts to

implement.” Agsalud v. Blalack, 67 Haw. 588, 591, 699 P.2d 17,

19 (1985) (citations omitted). Furthermore, an agency’s

authority to promulgate rules “is limited to enacting rules which

carry out and further the purposes of the legislation and do not

enlarge, alter, or restrict the provisions of the act being

administered.” Puana v. Sunn, 69 Haw. 187, 189, 737 P.2d 867,

870 (1987). Here, there are no statutory provisions that

preclude the HCRC from imposing strict liability on an employer

for the actions of its supervisory employees. To the contrary,

and as explained further infra, the statutory language provides

the HCRC with broad rulemaking authority that authorized the

promulgation of the rule at issue here.

From its inception, the HCRC was given broad authority

to create rules to enforce the State’s anti-discrimination laws.

In 1988, the legislature enacted the Hawai#i Civil Rights Act.

1988 Haw. Sess. Laws Act 219, § 1 at 387. The intent of the

Hawai#i Civil Rights Act was to “preserve all existing rights and

remedies” of the various state anti-discrimination laws,17 and to

17
At the time, the State’s Department of Labor and Industrial
Relations was the entity tasked with enforcing Hawaii’s anti-discrimination
laws. Under the department’s administrative regulations at the time,
(continued...)

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“provide a mechanism which provides for a uniform procedure for

the enforcement of the State’s discrimination laws.” 1988 Haw.

Sess. Laws Act 219, § 1 at 387 (emphasis added); HRS § 368-1. To

effectuate this intent, the legislature created the HCRC. The

powers and functions of the HCRC include “adopt[ing] rules under

chapter 91.” HRS § 368-3.

In addition, the legislature provided the HCRC with

broad discretion to order remedies for violations of the anti-

discrimination laws, including: “[h]iring, reinstatement, or

upgrading of employees with or without back pay[,]” HRS § 368-

17(a)(1) (Supp. 2002), requiring “[r]eporting as to the manner of

compliance[,]” HRS § 368-17(a)(6) (Supp. 2002), and ordering

“[o]ther relief the commission or the court deem[ed]

appropriate.” HRS § 368-17(a)(10) (Supp. 2002).

Thus, the legislature granted the HCRC broad authority

to promulgate and enforce rules that effectuate the State’s anti-

discrimination laws.18 Indeed, this court has held,
an administrative agency can only wield powers
expressly or implicitly granted to it by statute.
However, it is well established that an administrative
agency’s authority includes those implied powers that

17
(...continued)
employers were held strictly liable for the actions of their supervisory
employees. See HAR § 12-23-115(d) (1986).
18
The HCRC’s authority to promulgate rules is not without
restrictions. Indeed, this court has stated that the HCRC exceeded its
statutory authority in promulgating a regulation that allowed its executive
director or any interested person to petition the commission for a declaratory
ruling because that rule conflicted with a statutory provision. RGIS
Inventory Specialist v. Haw. Civil Rights Comm’n, 104 Hawai#i 158, 161, 86
P.3d 449, 452 (2004).

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are reasonably necessary to carry out the powers
expressly granted. The reason for implied powers is
that, as a practical matter, the legislature cannot
foresee all the problems incidental to carrying out
the duties and responsibilities of the agency.

Haole v. State, 111 Hawai#i 144, 152, 140 P.3d 377, 385 (2006)

(citation omitted).

The HCRC rules implicated in this case were “reasonably

necessary” in interpreting the statute. For example, the

legislature did not define the extent of an employer’s liability

or provide any defenses for discriminatory conduct. To “carry

out” its power of providing a “uniform procedure for the

enforcement of the State’s discrimination laws[,]” HRS § 368-1,

it was “reasonably necessary” for the HCRC to clarify these gaps

left in the statute. Haole, 111 Hawai#i at 152, 140 P.3d at 385.

With regard to HAR §§ 12-46-175(d) and (e), the HCRC

clarified the extent to which an employer could be held liable

for the actions of its employees, by providing that an employer

could be strictly liable for the discriminatory conduct of its

supervisory employees. It was within the HCRC’s power to

distinguish between supervisory employees and co-workers, Haole,

111 Hawai#i at 152, 140 P.3d at 385, and in so doing, the HCRC

furthered the purpose of Hawaii’s anti-discrimination statute.

For the same reasons, these rules do not “enlarge, alter, or

restrict” the provisions of HRS § 378-2. Again, the HCRC’s rules

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merely interpreted the statute to effectuate the legislative

purpose.19 See Puana, 69 Haw. at 189, 737 P.2d at 870.

Because the HCRC is tasked with enforcing the mandates

of HRS § 378-2, and the extent of an employer’s liability for the

conduct of supervisors and co-workers is not defined by statute,

the HCRC’s interpretation should be given deference. See Gillan,

119 Hawai#i at 114, 194 P.3d at 1076 (“[I]n the case of . . .

ambiguous statutory language, the applicable standard of review

regarding an agency’s interpretation of its own governing statute

requires this court to defer to the agency’s expertise and to

follow the agency’s construction of the statute unless that

construction is palpably erroneous.”); In re Water Use Permit

Applications, 94 Hawai#i 97, 144, 9 P.3d 409, 456 (2009)

19
The dissenting opinion relies on the Restatement (Second) of
Agency § 219 (1958) to conclude that HAR § 12-46-175(d) exceeds the scope of
the HCRC’s authority. Dissenting opinion at 34-44. Respectfully, however,
HAR § 12-46-175(d) is consistent with the theory of agency set forth in the
Second Restatement. As the dissenting opinion notes, see dissenting opinion
at 39-40, § 219(d) subjects an employer to liability for the conduct of a
supervisory employee where, inter alia, that employee was “aided in
accomplishing the tort by the existence of the agency relation.” Similarly,
HAR § 12-46-175(d) provides that the HCRC “will examine the circumstances of
the particular employment relationship and the job functions performed by the
individual in determining whether an individual acts in a supervisory or
agency capacity.” In other words, by its express terms, HAR § 12-46-175(d)
provides that the HCRC must determine whether the supervisory employee was
“aided . . . by the existence of the agency relation” before strict liability
will be imposed, and does not, as the dissenting opinion suggests, “render[]
employers liable for the tortious actions of their employees that may not have
been aided by the supervisory status of the offending employees.” Dissenting
opinion at 45.
Thus, under the plain language of the rule, the liability of
employers for the acts of supervisors is not limitless. For example, where “a
supervisor has no authority over an employee, because the two work in wholly
different parts of the employer’s business, it may be improper to find strict
employer liability.” Meritor, 477 U.S. at 77 (Marshall, J., concurring). The
last sentence of HAR § 12-46-175(d) appropriately accounts for such a
situation.

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(“[W]here an administrative agency is charged with the

responsibility of carrying out the mandate of a statute which

contains words of broad and indefinite meaning, courts accord

persuasive weight to administrative construction and follow the

same, unless the construction is palpably erroneous.” (citation

omitted)). It is not “palpably erroneous” for the HCRC to

interpret HRS § 378-2 to impose strict liability on employers for

the discriminatory conduct of its supervisors. See,

e.g., Meritor, 477 U.S. at 76-77 (Marshall, J., concurring)

(“[I]t is the authority vested in the supervisor by the employer

that enables him to commit the wrong: it is precisely because the

supervisor is understood to be clothed with the employer’s

authority that he is able to impose unwelcome sexual conduct on

subordinates.”).

Moreover, HRS § 368-1 provides that the intent of the

Hawai#i Civil Rights Act, and its creation of the HCRC, was to

“preserve all existing rights and remedies” of the various state

anti-discrimination laws.” 1988 Haw. Sess. Laws Act 219, § 1 at

387 (emphasis added); HRS § 368-1 (emphasis added). In this

regard, prior to the creation of the HCRC, the administrative

rules of the Department of Labor and Industrial Relations — the

agency formerly tasked with enforcing Hawaii’s anti-

discrimination laws — held employers strictly liable for the

discriminatory actions of their supervisory employees.

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HAR § 12-23-115(d) (1986) provided:
An employer is responsible for its acts and those of
its agents and supervisory employees with respect to
harassment on the basis of ancestry regardless of
whether the specific acts complained of were
authorized or even forbidden by the employer and
regardless of whether the employer knew or should have
known of their occurrence. The department will
examine the circumstances of the particular employment
relationship and the job functions performed by the
individual in determining whether an individual acts
in a supervisory or agency capacity.

The current language of HAR § 12-46-175(d), which the

HCRC adopted in 1990, is nearly identical to the language of HAR

§ 12-23-115(d),20 which existed prior to the creation of the

HCRC. When the legislature created the HCRC in 1988, it did not

expressly preclude the HCRC from imposing strict liability on

employers for the actions of their supervisory employees, as was

already authorized under the existing administrative rules of the

Department of Labor and Industrial Relations. Given that one of

the purposes of creating the HCRC was to “preserve all existing

rights and remedies,” and that the legislature did not expressly

foreclose the HCRC from adopting the then existing anti-

discrimination rights and remedies, the HCRC did not violate its

statutory mandate in adopting HAR § 12-46-175(d).

In sum, HAR § 12-46-175(d) imposes strict liability on

employers for the discriminatory conduct of their supervisory

employees, and thus, the Faragher affirmative defense is not

20
The only difference between the two regulations is the reference
to the “department” in HAR § 12-23-115(d) and “commission” in HAR § 12-46-
175(d).

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applicable to HRS chapter 378.21 Accordingly, the circuit court

erred in granting summary judgment in favor of JN on Lales’s

state harassment claim.

C. There were genuine issues of material fact regarding whether
JN’s proffered reasons for Lales’s termination were
pretextual (COAs 2 and 6)

In Schefke, this court adopted a tripartite burden-

shifting test for retaliation claims under HRS § 378-2(2):
(1) the plaintiff must first establish a prima facie
case of such retaliation by demonstrating that (a) the
plaintiff (i) “has opposed any practice forbidden by
HRS chapter 378, Employment Practices, Part I,
Discriminatory Practices or (ii) has filed a
complaint, testified, or assisted in any proceeding
respecting the discriminatory practices prohibited
under this part,” (b) his or her “employer, labor
organization, or employment agency has . . .
discharged, expelled, or otherwise discriminated
against the plaintiff,” and (c) “a causal link has
existed between the protected activity and the adverse
action;” (2) if the plaintiff establishes a prima
facie case of retaliation, the burden shifts to the
defendant to provide a legitimate, nondiscriminatory
reason for the adverse employment action; and (3) if
the defendant articulates such a reason, the burden
shifts back to the plaintiff to show evidence
demonstrating that the reason given by the defendant
is pretextual.

96 Hawai#i at 426, 32 P.3d at 70 (brackets and citations

omitted).

Similarly, this court described the burden shifting

test for retaliation claims brought under Title VII:

21
Contrary to the dissent’s suggestion, HAR § 12-46-175(d) indeed
allows the HCRC to conduct a case-by-case determination of whether the acts of
a supervisor subject the employer to liability. See dissenting opinion at 42-
43. As noted above, the HCRC is required to examine the “circumstances” of
the employment relationship to determine whether the individual acts in a
supervisory or agency capacity. HAR § 12-46-175(d). An examination of the
“circumstances” necessitates analyzing whether the acts of the supervisor
appropriately subject the employer to liability.

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Under Title VII of the Civil Rights Act of 1964,
42 U.S.C. §§ 2000e-1 to 2000e-17 (1994), . . . federal
courts have held that, in a prima facie case of
retaliation, an employee must show that (1) he or she
engaged in a protected activity; (2) his or her
employer subjected him or her to an adverse employment
action; and (3) a causal link existed between the
protected activity and the adverse action. If a
plaintiff has asserted a prima facie retaliation
claim, the burden shifts to the defendant to
articulate a legitimate nondiscriminatory reason for
its decision. If the defendant articulates such a
reason, the plaintiff bears the ultimate burden of
demonstrating that the reason was merely a pretext for
a discriminatory motive.

Schefke, 96 Hawai#i at 425, 32 P.3d at 69 (brackets and citations

omitted).

Defendants argue that Lales did not submit sufficient

evidence regarding his state and federal retaliation claims to

create a genuine issue of material fact as to whether JN’s reason

for his firing was pretextual. As discussed further below,

Defendants’ argument is without merit.

Because it is not now disputed that Lales established a

prima facie case of retaliation, the burden shifted to JN to

provide a legitimate nondiscriminatory reason for Lales’s

termination. Schefke, 96 Hawai#i at 426, 32 P.3d at 70.

Defendants argued that JN’s legitimate nondiscriminatory reason

for terminating Lales was that Lales lied to customers when

telling them that there was air conditioning in a truck that he

sold to them. See Tex. Dep’t of Comm. Affairs v. Burdine, 450

U.S. 248, 256 (1981) (“[T]he employer’s burden is satisfied if he

simply ‘explains what he has done’ or ‘produc[es] evidence of

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legitimate nondiscriminatory reasons.’”). Lales asserts that

this reason was pretextual.

Although Defendants presented evidence that

contradicted Lales’s evidence, Lales’s evidence created genuine

issues of material fact regarding whether JN’s reasons for

Lales’s termination were pretextual. In his declaration attached

to his opposition to JN’s motion for summary judgment, Lales

stated that he was subjected to derogatory comments about his

ancestry and national origin at JN. Lales further asserted that

approximately one month before his termination, Lales orally

complained to Marxen about the discrimination, and Marxen

responded, “You Fucking French Bastard, get out of my office[.]”

One month later, on June 23, 2002, Marxen initially told Lales

that he was terminated for not selling enough cars and for

missing a meeting.22 Lales met with Marxen and questioned the

rationale for his termination, stating that he had not been

notified of the meeting and that other employees had lower sales

than he did. Marxen then changed his mind and allowed Lales to

continue to work the next day. The next day, however, Lales was

terminated for allegedly lying to his customers about air

22
Marxen explained that JN regularly uses termination letters to
motivate its employees: “A lot of times, our terminations are idle threats. A
lot of times, they’re geared to – they’re used to motive [sic] the people to
get them to go back to work, and laying around and coming in late, that type
of thing, which I’m not saying that’s the case with [] Lales.”

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conditioning in the truck he sold them. Lales explicitly denied

telling the customers that the truck had air conditioning.23

When considering the evidence in the light most

favorable to Lales, see First Ins., 125 Hawai#i at 413-14, 271

P.3d at 1172-73, there are genuine issues of material fact as to

the whether the reasons for Lales’s termination were pretextual.

In Burdine, 450 U.S. at 256, the United States Supreme Court

stated that a plaintiff may establish pretext “either directly by

persuading the court that a discriminatory reason more likely

motivated the employer or indirectly by showing that the

employer’s proffered explanation is unworthy of credence.” See

also Shoppe v. Gucci Am., Inc., 94 Hawai#i 368, 379, 14 P.3d

1049, 1060 (2000) (citing Burdine, 450 U.S. at 256). In this

case, Lales’s declaration offers sufficient evidence to raise an

issue of fact about whether his termination was pretext for a

discriminatory motive, specifically, because of (1) Marxen’s

allegedly hostile reaction to Lales’s oral complaint, (2) the

temporal proximity (amount one month) between the complaint and

the termination, and (3) the aborted attempt to fire him on the

previous day, which, given the surrounding circumstances

23
Although the ICA appeared to rely on Lales’s statements that other
employees at JN Automotive told the customers that the car had air
conditioning, and those employees were not fired, [ROA vol. 11 at 170] these
statements appear to be inadmissible hearsay, Hawai#i Rules of Evidence Rule
802, and accordingly, it appears that the ICA erred in considering these
statements. However, any such error was harmless because there was still
sufficient evidence to raise an issue of material fact as to whether JN’s
rationale for Lales’s termination was pretextual.

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suggested by Lales’s declaration, raises an inference of

retaliatory intent.

Citing Villiarimo v. Aloha Island Air, Inc., 281 F.3d

1054 (9th Cir. 2002), Defendants argue that “the ICA incorrectly

accepted that the relevant issue was whether [Lales] had, in

fact, lied to the customers, rather than if the reason for

terminating [Lales] was false. Whether [Lales] lied or not is

not material — the question is whether [Defendants] believed that

[Lales] had lied.” However, Villiarimo is distinguishable from

the present case. There, the employee, Reloynne Villiarimo, was

a ramp supervisor for Aloha Island Air. Id. at 1058. The

airline insisted that it terminated Villiarimo because she

violated a rule in connection with an accident that resulted in

damage to one of the airline’s airplanes, and she had been

dishonest during the investigation of the accident. Id.

Villiarimo did not dispute that she failed to perform her job

satisfactorily, which resulted in damage to the airplane. Id. at

1062 n.8. However, Villiarimo maintained that she was terminated

because of her sex and that the reasons offered by the airline

for her termination were pretextual. Id. at 1061-63. Villiarimo

specifically argued that the airline’s reason for her termination

changed over time, that three of the airline’s witnesses were not

credible, and that a state agency had already determined, in the

context of unemployment benefits, that she had not been fired for

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work-related misconduct. Id. at 1063. In regard to the

credibility of the witnesses, the Ninth Circuit stated that

Villiarimo’s assertion was “unavailing” because courts “only

require that an employer honestly believed its reason for its

actions, even if its reason is ‘foolish or trivial or even

baseless.’” Id. (citation omitted). The Ninth Circuit noted

that Villiarimo did not present evidence that the airline did not

honestly believe its proffered reasons. Id.

Defendants rely on this specific portion of Villiarimo

to argue that JN honestly believed that it was firing Lales

because he lied to customers about the air conditioning in their

truck, and thus, this court should affirm the circuit court’s

grant of summary judgment. Defendants’ reliance on this portion,

however, is misplaced because in the present case, there is a

genuine issue of material fact as to whether JN honestly believed

its reasons for its actions, specifically given that Lales put

forth evidence, through his declaration, that indicates an

allegedly retaliatory intent on the part of Marxen when he

terminated Lales. Accordingly, Defendants’ reliance on

Villiarimo is not persuasive.

Accordingly, the ICA did not err in reversing and

remanding the circuit court’s granting of summary judgment on

Lales’s retaliation claims against JN.

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D. Lales produced sufficient evidence to raise genuine issues
of material fact as to COAs 1, 2, 5, and 6

Defendants also generally challenge the evidence

submitted by Lales in opposition to the motions for summary

judgment. Defendants argue that because Lales’s evidence was

“faulty,” the circuit court’s grant of summary judgment should be

affirmed. More specifically, Defendants argue that the ICA

gravely erred by:
(1) largely ignoring the evidence presented by
[Defendants], and only viewing [Lales’s] “evidence” in
the light most favorable to him; (2) considering
inadmissible “evidence” and uncorroborated self-
serving statements submitted by [Lales] in a sham
declaration; and (3) considering [Lales’s]
inadmissible evidence to find that material facts
existing so as to preclude summary judgment.

As discussed below, Defendants’ arguments are without

merit, and Lales’s evidence was sufficient to raise a genuine

issue of material fact as to all the challenged COAs.

1. The ICA did not improperly ignore evidence presented by
Defendants

Defendants argue that the ICA “ignored” evidence that

they presented with their motion for summary judgment and relied

only on Lales’s evidence. Defendants point out that the

background section of the ICA’s memorandum opinion and the ICA’s

analysis rely largely on Lales’s submissions to the circuit

court. As set forth below, the ICA properly viewed the evidence

in the light most favorable to Lales. Moreover, to the extent

Defendants’ evidence conflicts with that of Lales’s it raises a

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dispute as to issues of material fact, making summary judgment

inappropriate.

This court has held that, once a summary judgment

movant has satisfied its initial burden of producing support for

its claim that there is no genuine issue of material fact, the

party opposing summary judgment must “demonstrate specific facts,

as opposed to general allegations, that present a genuine issue

worthy of trial.” French v. Haw. Pizza Hut, Inc., 105 Hawai#i

462, 470, 99 P.3d 1046, 1054 (2004) (emphasis omitted). “The

evidence must be viewed in the light most favorable to the non-

moving party.” First Ins., 126 Hawai#i at 414, 271 P.3d at 1173.

Here, the ICA specifically stated that it was viewing the

evidence in the light most favorable to Lales. Lales, 2012 WL

1624013, at *1 n.6, *15. The Defendants do not identify any

legal authority that would require the ICA to explain how

Defendants’ evidence conflicts with that evidence. Rather, the

ICA was required to view the evidence in the light most favorable

to Lales to determine whether there were disputed issues of

material fact worthy of trial. Id. Here, for example, the ICA

stated that it relied on “the matters set forth in Lales’s

declaration in opposition to JN’s motion for summary judgment” to

conclude that “Lales was subjected to persistent, derogatory, and

unwelcome statements and comments about his ancestry and national

origin” and that there were “genuine issues of material fact

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regarding [Lales’s] claims against JN for harassment based on

ancestry and national origin discrimination.” Lales, 2012 WL

1624013, at *16. These facts were sufficient to raise a genuine

issue of material fact and were, thus, “worthy of trial.”

French, 105 Hawai#i at 470, 99 P.3d at 1054.

Thus, Defendants’ argument that the ICA erred in not

considering its evidence and only relying on Lales’s evidence is

without merit.

2. Lales’s declaration was consistent with his prior
admissions and deposition statements, and thus, did not
constitute a “sham affidavit”

Defendants argue that the ICA erred in relying on

Lales’s “conflicting, contradicting, uncorroborated, and self-

serving” statements to conclude that there were genuine issues of

material fact. Defendants argue that “[b]ased on the numerous

inconsistencies and contradictions, the circuit court rightly

disregarded conflicting portions of [Lales’s] Declaration as

self-serving and essentially a sham.” As explained infra, the

circuit court improperly made credibility determinations when it

discounted Lales’s declaration that was attached to his

opposition to JN’s motion for summary judgment. Moreover,

Lales’s declaration was not a sham and is not clearly and

unambiguously inconsistent with his statements made in a prior

deposition and prior admissions.

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Although Defendants argue that the circuit court did

not err in explicitly stating that it made a credibility

determination, it is clear that in ruling on a motion for summary

judgment, the court must not make credibility determinations.

Del Rosario v. Kohanuinui, 52 Haw. 583, 587 n.4, 483 P.2d 181,

183 n.4 (1971) (“The clash of evidence on this point makes a

precise factual determination impossible and prompts a

consideration of . . . credibility, an improper matter for

summary judgment resolution.”).

Moreover, Defendants’ argument relies on a federal

doctrine prohibiting “sham affidavits.” In general, the “sham

affidavit” doctrine applies when the affidavit of a non-moving

party in a motion for summary judgment contradicts or is

inconsistent with his or her previous deposition testimony. See

10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane,

Federal Practice & Procedure § 2726 (3d ed. 1998). Under this

doctrine, a non-moving party generally cannot create a genuine

issue of fact “simply by submitting an affidavit contradicting

his [or her] own prior testimony.” Van Asdale v. Int’l Game

Tech., 577 F.3d 989, 998 (9th Cir. 2009).

The purpose of the “sham affidavit” doctrine is to

preserve “the utility of summary judgment as a procedure for

screening out sham issues of fact.” Kennedy v. Allied Ins. Mut.

Co., 952 F.2d 262, 266 (9th Cir. 1991) (quoting Foster v. Arcata

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Assocs., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985)); see also Van

Asdale, 577 F.3d at 998. However, the sham affidavit doctrine

does not prohibit the non-moving party from “elaborating upon,

explaining, or clarifying prior testimony elicited by opposing

counsel on deposition” in his or her affidavit. Van Asdale, 577

F.3d at 999 (citation omitted). Furthermore, the sham affidavit

doctrine does not prohibit attempts by the non-moving party to

clarify inconsistencies that result from “an honest discrepancy,

mistake, or newly discovered evidence.” Id. (citation omitted).

The Ninth Circuit has held that two requirements must

be met before the court can strike an affidavit and grant summary

judgment: (1) the trial court must make a factual determination

that the contradiction was indeed a “sham” produced to avoid

summary judgment and (2) the inconsistencies have to be clear and

unambiguous to justify striking the affidavit. Id. at 998-99.

If either requirement is not met, the court must consider the

non-moving party’s affidavit in its determination to grant or

deny summary judgment. Id. at 999.

This court has not explicitly adopted or rejected the

sham affidavit doctrine as set forth by the Ninth Circuit, and we

need not resolve this issue here. Even assuming arguendo that

the sham affidavit doctrine is available, it would not be

applicable in the instant case because Lales’s declaration was

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not clearly and unambiguously inconsistent with his prior

deposition and admissions.

Here, Defendants argue that the circuit court properly

made a credibility determination regarding “numerous factual

inconsistencies in [Lales’s] own admissions that undermine his

claims[,]” such as: (1) the allegedly changing circumstances

regarding Lales’s meeting with Marxen, in which Lales requested

to be transferred from Martinez’s supervision, and (2) Lales’s

alleged inconsistent statements regarding his consent to the use

of the name “Frenchy.” However, these “inconsistencies” are not

so “clearly and unambiguously inconsistent” that Lales’s

declaration would be disregarded under the sham affidavit

doctrine. Id. at 998-99.

Defendants argue that Lales’s rendition of his

conversation with Marxen regarding changing sales teams was

inconsistent because he admitted that he requested a transfer

from Martinez’s sales team because of “personality conflicts,”

and also stated in his prior deposition that he “told [] Marxen

that [he] was really tired of [] Martinez[’s] behavior toward

[him], the way he treated [him], the way he would almost on a

daily basis threaten[] [him] physically to go to the boneyard and

retaliat[ed] against [him] on a daily basis.” However, these

statements are not inconsistent with Lales’s subsequent

declaration, wherein Lales stated, “I verbally complained to []

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Marxen about the harassment and [] Martinez” and that he asked to

be transferred from Martinez’s team because of Martinez’s

behavior toward him, which included derogatory remarks toward

Lales, such as “French fries,” “French are [wimps],” “French do

not know how to fight,” “French people stink,” and “French women

are whores[.]” Thus, Lales’s statements regarding his

conversation with Marxen were not inconsistent inasmuch as the

declaration merely clarified his prior statements.

Defendants also contend that Lales’s declaration is

inconsistent with Lales’s admission that he “never submitted

complaints to management regarding the use of the nickname

‘Frenchy[,]’” and a deposition in which Lales stated that he used

the name “Frenchy” and signed this nickname on documents. Lales

stated in his subsequent declaration that he “never consented to

any of these discriminatory remarks made concerning [his]

national origin/ancestry or the derogatory treatment of [him] by

Defendant[,]” and that he felt like the name “Frenchy” was

“offensive.” Lales’s statement in his declaration is not

inconsistent with his prior admission and statement in his

deposition. First, contrary to Defendants’ characterization of

Lales’s admission, Lales only admitted that he never submitted

“written” complaints to management regarding the use of the name,

“Frenchy.” Second, in a deposition Lales stated that he

“probably did” refer to himself as Frenchy, but explained that he

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did so out of fear of retaliation. Therefore, it is not

inconsistent for Lales to state in his declaration that he did

not consent to being called “Frenchy.” Lales clearly stated in

his admission that he did not file a written complaint, but

stated that he orally complained, and he expressly stated a few

times in his deposition that he used the name “Frenchy” because

of his fear of retaliation. Lales’s declaration explained the

prior statements that he made.

Accordingly, the challenged portions of the declaration

are not clearly and unambiguously inconsistent with Lales’s prior

deposition statements and admissions. Thus, Lales’s declaration

was not a “sham.”

3. The ICA did not improperly rely on inadmissible
evidence

Defendants contend that the ICA improperly relied on

“speculation and conclusory statements by Lales” and also

evidence that was “conflicting and inadmissible.” Defendants

appear to assert that the ICA improperly relied on the following

exhibits and statements that were attached to Lales’s opposition

to JN’s motion for summary judgment: (1) an EEOC interview and

statements, which were not authenticated or sworn to; (2) an EEOC

Determination letter, which Defendants assert was hearsay; (3) a

complaint of another employee against JN, which Defendants also

assert was hearsay; (4) copies of newspaper and blog articles;

and (5) Lales’s statement in his declaration that other employees

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lied to the customers about the air conditioning and were not

fired. Also, Defendants contend that Lales made many

inadmissible, conclusory statements in his declaration that were

not based on personal knowledge, such as: (1) claiming that he

was hired by Carlton Hill; (2) asserting that he was transferred

by Paul Tucker; and (3) using the legal terms “discriminated” and

“retaliation.” As discussed below, the ICA did not rely on

inadmissible evidence in its determination.

Hawai#i Rules of Civil Procedure (HRCP) Rule 56(e)

(2000), provides, in relevant part:
Supporting and opposing affidavits shall be made
on personal knowledge, shall set forth such facts as
would be admissible in evidence, and shall show
affirmatively that the affiant is competent to testify
to the matters stated therein. Sworn or certified
copies of all papers or parts thereof referred to in
an affidavit shall be attached thereto or served
therewith. The court may permit affidavits to be
supplemented or opposed by depositions, answers to
interrogatories, or further affidavits. When a motion
for summary judgment is made and supported as provided
in this rule, an adverse party may not rest upon the
mere allegations or denials of the adverse party’s
pleading, but the adverse party’s response, by
affidavits or as otherwise provided in this rule, must
set forth specific facts showing that there is a
genuine issue for trial. If the adverse party does
not so respond, summary judgment, if appropriate,
shall be entered against the adverse party.

(Emphasis added).

Here, the ICA did not rely on the EEOC interview and

statements, EEOC Determination letter, complaint of a fellow

employee, or newspaper and blog articles in concluding that

Defendants were not entitled to summary judgment, and the ICA did

not mention these exhibits in its memorandum opinion. See Lales,

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2012 WL 1624013, at **1-18. The ICA relied only on Lales’s

declarations to determine that there were “genuine issues of

material fact regarding Lales’s claims against JN for harassment

based on ancestry and national origin discrimination.” Id. at

*16.

As to the retaliation claims, the ICA relied on Lales’s

statement that he complained to Marxen about the harassment, and

that Lales was subsequently terminated within one month of

reporting the alleged discriminatory conduct. Id. at *17.

Although the ICA did not specifically state what it relied on to

conclude that there was an issue of material fact as to whether

JN’s proffered reasons for Lales’s termination were pretextual,

Lales stated in his declaration that he denied telling the

customers that the truck had air conditioning. All these

statements by Lales would be admissible because they are from his

“personal knowledge.” See HRCP Rule 56(e). In addition, the

allegedly improper evidence was not necessary to the ICA’s

outcome. Accordingly, Defendants’ arguments regarding this

evidence are misplaced.

With regard to Defendants’ argument that Lales’s

Declaration contained inadmissible conclusory statements, those

alleged conclusory statements are irrelevant because the ICA did

not rely on them in making its determination to vacate summary

judgment. In regard to the claim that Lales used the legal terms

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“discriminated” and “retaliation” throughout his declaration,

again, there is no indication that the ICA relied on Lales’s use

of these terms in making its determination.

Thus, the ICA did not rely on inadmissible evidence to

conclude that the circuit court erred in granting summary

judgment.

E. The circuit court erred in granting summary judgment in
favor of JN on COA 4

Defendants assert that the ICA erred in vacating

summary judgment in favor of JN on COA 4 because the remedies

available to Lales in COA 4 were covered by remedies in HRS

chapter 378, and accordingly, the circuit court did not err in

granting summary judgment in favor of JN on COA 4. As discussed

below, Defendants’ assertion has merit if the public policy claim

was derived from the provisions of HRS chapter 378. However,

inasmuch as the parties did not address the basis for Lales’s

public policy claim in relation to JN’s motion for summary

judgment, the basis for COA 4 is unclear, and thus, the ICA did

not err in vacating summary judgment.

Although JN challenged all of Lales’s claims in its

motion for summary judgment, it did not provide any argument

regarding why the circuit court should have granted summary

judgment on COA 4 in its memorandum in support of his motion. At

the hearing on JN’s motion for summary judgment and after being

asked by Lales’s counsel if the circuit court also ruled on the

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public policy count, the circuit court stated, “I am granting

Summary Judgment on all counts. The public policy count

runs . . . together with the reasoning that I have previously

cited.” The circuit court did not address the public policy

issue in its findings of fact and conclusions of law.

In Ralston, this court described the burden in motions

for summary judgment,
First, the moving party has the burden of
producing support for its claim that: (1) no genuine
issue of material fact exists with respect to the
essential elements of the claim or defense which the
motion seeks to establish or which the motion
questions; and (2) based on the undisputed facts, it
is entitled to summary judgment as a matter of law.
Only when the moving party satisfies its initial
burden of production does the burden shift to the non-
moving party to respond to the motion for summary
judgment and demonstrate specific facts, as opposed to
general allegations, that present a genuine issue
worthy of trial.

129 Hawai#i at 56-57, 292 P.3d at 1286-87 (emphasis added).

In the instant case, JN never provided support for its

motion for summary judgment on the public policy claim. As such,

Lales was not required to present evidence sufficient to raise an

issue of material fact as to whether JN’s termination of Lales

violated public policy. Id. Moreover, Lales was not given an

opportunity to respond to any arguments regarding the public

policy claim. See Edwards v. Honeywell, Inc., 960 F.2d 673, 674

(7th Cir. 1992) (noting that the trial court “erred by granting

summary judgment on grounds to which [the non-moving party] was

given either an inadequate opportunity or no opportunity to

respond”). Thus, the ICA did not err in vacating the circuit

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court’s grant of summary judgment in favor of JN on the public

policy claim.

In their application, Defendants contend that Lales’s

public policy claim is “based on the same factual basis as the

counts based in HRS chapter 378.” Defendants cite to the first

amended complaint and argue that Lales did not allege “any new

facts or any new elements in his Amended Complaint relating to

[COA] 4.” In his first amended complaint, Lales

“reincorporate[d] and reallege[d] paragraphs 1 through 27” and

asserted that his termination “was in violation of public policy

for which [Defendants] are liable.” Although it may appear that

the public policy claim would be based on the same facts as the

HRS chapter 378 claims, the record is unclear as to the scope of

the public policy claim.

As Defendants and ICA note, however, should the circuit

court determine on remand that the public policy claim is indeed

derived from HRS chapter 378, such a claim would be barred. In

Takaki v. Allied Machinery Corporation, the ICA stated, “If . . .

the statutory or regulatory provisions which evidence the public

policy themselves provide a remedy for the wrongful discharge,

provision of a further remedy under the public policy exception

is unnecessary.” 87 Hawai#i 57, 63, 951 P.2d 507, 513 (App.

1998); see also Ross v. Stouffer Hotel Co., 76 Hawai#i 454, 464,

879 P.2d 1037, 1047 (1994) (noting that a claim for wrongful

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termination in violation of public policy cannot be asserted

“where the policy sought to be vindicated is already embodied in

a statute providing its own remedy for its violation”).

Therefore, the ICA did not err in vacating the circuit

court’s granting of summary judgment in favor of JN on the public

policy claim.

IV. Conclusion

In sum, summary judgment in favor of Marxen on COAs 1

and 2 was appropriate in this case. However, summary judgment in

favor of JN on COAs 1, 2, 4, 5, and 6, was inappropriate.

Therefore, we affirm in part and vacate in part the ICA’s

judgment and remand to the circuit court for further proceedings.

Christopher J. Muzzi /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
Daphne E. Barbee
for respondent /s/ Sabrina S. McKenna

/s/ R. Mark Browning

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