NOT FOR PUBLIC.A'TI()N IN W}CS'I"S HAW'AI‘I REPORTS AND PAC`IFIC REPOR'I"ER
No. 27868 ;;< 213
IN THE INTERMEDIATE COURT OF APPEALS §§
(11§’,!
01= THE STATE oF HAWA:‘: ply
m YW
DAVID c. FARMER, on behalf of . w
the Bankruptcy ESTATE OF DANIEL T. KEOMALU,:5 *
Plaintiff/Counterclaim Defendant-Appellant,vJ §§
v.
HICKAM FEDERAL CREDIT UNION; Defendant/Counterclaim
Plaintiff/Third-Party Plaintiff~Appellee,
and GERARD AUYONG; and STEPHEN Y.H. KWOCK,
Defendants-Appellees, and JOHN DOES 1-10;
JANE DOES l~lO; DOE UNINCORPORATED ASSOCIATIONS,
INCLUDING PARTNERSHIPS l~lO, Defendants,
v.
CUTTER PONTIAC, BUICK, GMC OF WAIPAHU, INC., CJW
MOTORS, INC., DOES 1-lO0, Third~Party DefendantS
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 04-l-0732)
MEMORANDUM OPINION
(By: Nakamura, C.J., Foley and Fujise, JJ.)
This case arises out of the termination of Daniel T.
Keomalu (Keomalu) from his employment with Defendant-Appellee
Hickam Federal Credit Union (HFCU). At the time of his
termination, Keomalu was Vice-President of Loans.
In 200l, HFCU instituted an automobile dealer loan
program which resulted in a higher volume of automobile loans to
HFCU members for new and used automobiles. After the dealer loan
program began, HFCU experienced a significant increase in the
percentage and the amount of delinquent loans made by the loan
department, which raised concerns about the soundness of the
loans being made. The percentage of delinquent loans increased
from O.39% to 2.22% and the amount of delinquent loans increased
from $739,l6O to $5,l56Q846 between September 2001 and August
2002. Based on the concerns regarding its loans, HFCU conducted
an investigation involving Keomalu and the loan department.
As part of the investigation, HFCU retained Defendant~
Appellee Stephen Y.H. Kwock (Kwock), a certified public
accountant (CPA), to review HFCU’s loan procedures. Kwock
subsequently issued two special audit reports that were critical
NOT F()R PUBLIC,A{]`[ON IN WIZS'["S }.
An employee or officer of a company, acting within the
scope of his or her employment, cannot be liable for interfering
with a contract of his or her employer. See Kahala RoVal Corp.
v. Goodsill Anderson Quinn & Stifel, 113 HawaiU.251, 273-75, 151
P.3d 732, 754-56 (2007). In Kahala Royal, the plaintiff brought
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NOT FOR PUBI.ICA'I`ION lN WEST’S HAWA.I‘I REPORTS AN_D PACIP`IC R`EPORTI:`.R
suit against two corporate officers and directors, who were
acting within the scope of their authority, for tortiously
interfering with the contractual relations of the entities they
represented. ldg at 273, 151 P.3d at 754. The HawaiE.Supreme
Court upheld the dismissal of the plaintiff's complaint,
reasoning that
A party cannot "interfere" with its own contracts, so the
tort fof tortious interference with the corporation‘s
contracts] itself can be committed only by a third party.
In the case of a corporation, the legal entity acts through
its directors and officers. Thus, when officers or
directors act in their official capacity as agents of the
corporation, they act not as individuals but as the
corporation itself. In doing so, they are not acting as a
third party, but rather as a party to the contract and
cannot be personally liable for tortious interference with
the contract.
;d; at 274, 151 P.3d at 755 (quoting Trail v. Boys & Girls Club
of Northwest Indiana, 845 N.E.2d 130, 138 (Ind. 2006)).
Keomalu's complaint alleges that Auyong was "at all
times . . . acting . . . within the scope of his employment as an
employee of [HFCU]." Because Auyong was acting within the scope
of his employment for HFCU at all relevant times, he was not a
third party to the employment contract between Keomalu and HFCU,
and he could not tortiously interfere with the employment
contract. Therefore, the circuit court properly dismissed
Keomalu's claim against Auyong for conspiracy to interfere with
the contract between Keomalu and HFCU.
Given the proper denial of Keomalu's claim against
Auyong, Keomalu's claim against Kwock for conspiracy to interfere
with Keomalu's employment contract with HFCU likewise cannot
stand and was properly dismissed.
Generally speaking, the accepted definition of a
conspiracy is a combination of two or more persons or
entities by concerted action to accomplish a criminal or
\ unlawful purpose, or to accomplish some purpose not in
itself criminal or unlawful by criminal or unlawful means.
Robert's Hawaii School Bus, Inc. v. Laupahoehoe Transp. Co., 91
HaWaifi 224, 252 n.28, 982 P.2d 853, 881 n.28 (l999) (internal
quotation marks, brackets, and citations omitted). Kwock could
not form a conspiracy with Auyong to interfere with Keomalu's
employment contract with HFCU because Auyong was acting within
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NO'I` FOR I’U'BLI'CA'YION IN WISS'I"S HAW¢XI‘I REP()RTS ANI) PACIFIC REPOR'FRIZ
the scope of his employment at all times, and Auyong was not a
third party to the contract. without a combination of two
persons, no conspiracy can occur, and thus Kwock could not have
conspired with Auyong to tortiously interfere with Keomalu's
employment contract with HFCU.W The circuit court properly
granted Kwock's motion to dismiss and/or for partial summary
judgment on Keomalu's claim against Kwock for conspiracy to
interfere with Keomalu's employment contract.
V.
Keomalu argues that the circuit court erred by
dismissing Keomalu's claim that Kwock and Auyong conspired to
violate public policy resulting in Keoma1u's wrongful discharge
from HFCU. This claim was made pursuant to Parnar v. Americana
Hotels, Inc., 65 Haw. 370, 380, 652 P.2d 625, 631 (1982), which
held that "an employer may be held liable in tort where his
discharge of an employee violates a clear mandate of public
policy." We conclude that the circuit court properly dismissed
Keomalu's claim that Kwock and Auyong conspired to violate public
policy resulting in Keomalu's wrongful discharge.
At the outset, we note that Keomalu was not terminated
by Kwock or Auyong, but by the HFCU Board based on the
recommendation of the Personnel Committee, of which neither Kwock
nor Auyong was a member. Kwock was not Keomalu's supervisor or
even an employee of HFCU. Under these circumstances, it is
difficult to see how Kwock and Auyong could have conspired to
wrongfully discharge Keomalu in violation of public policy.‘
Putting that aside, Keomalu asserted that Kwock and
Auyong conspired to violate the clear mandates of public policy
against discrimination on the basis of race, age, ancestry, and
disability set forth in HRs § 373~2(1), (2), (3), and (6) (supp.
2008). A Parnar tort based on a violation of public policy is
limited, however, to situations in which "a remedy is not
y Kwock's qualified privilege with respect to the special audit reports
provides an additional ground to support the circuit court's dismissal of
Keomalu’s claim that Kwock conspired with Auyong to interfere with Keoma1u's
employment contract. §§§ Chow v. Alston, 2 Haw. App. 480, 484, 634 P.2d 430,
434 (1981) .
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NOT F()R PUB!_,[CA'I`I()N lN WEST'S }I.»\W,z\.l‘l REPOR'I`S AND PAC{F!C R}_IP()R'I`EI€
provided for violation of the clear public policy involved."
Takaki v. Allied Machinery Corp., 87 Hawafi 57, 63, 951 P.2d
507, 513 (App. 1998) (internal quotation marks omitted). Stated
another way, where "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." Ross v. Stouffer Hotel
_C___Q_._, 76 Hawai‘i 454, 464, 879 P.Zd l037, 1047 (1994) (internal
quotation marks and citations omitted).
Here, HRS Chapter 378, Part I, which prohibits the
discriminatory employment practices set forth in HRS § 378-2,
also provides a remedy for victims of these discriminatory
employment practices. §§§ HRS § 378-5 (1993). Thus, Keomalu was
not entitled to bring a claim for conspiracy to violate public
policy based on alleged violations of HRS § 378-2. §§g BQ§§, 76
Hawafi at 463~64, 879 P.2d at 1046-47; Takaki, 87 HawaFi at 63,
951 P.2d at 513.
For a civil conspiracy claim to be valid, an underlying
tort must be shown. We have already rejected Keomalu's challenge
on appeal to the circuit court's dismissal of Keomalu's claims
for defamation, false-light, NIED, and IIED. To the extent that
Keomalu's claim for conspiracy to violate public policy resulting
in his wrongful discharge was based on these alleged underlying
torts, the circuit court's dismissal of the public policy
conspiracy claim was likewise proper.
VI.
Prior to trial, the circuit court dismissed Keomalu's
claim that HFCU violated public policy resulting in Keomalu's
wrongful discharge, except for the portion of his claim alleging
that HFCU had violated public policies contained in the HWPA
which the court allowed to proceed to trial. Keomalu argues that
the circuit court erred in dismissing his non~HWPA public policy
claim. we disagree.
we reject Keomalu's argument that he was entitled to
bring a public policy claim based on the allegation that his
termination violated disciplinary procedures set forth in HFCU's
Employee Handbook. There is no constitutional, statutory, or
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N()'l` FOR PUIZL]CA'I`I()N IN VVES']"S flAWlAI‘If REP()RTS AND PACIFIC REPOR'I`EIR
regulatory provision requiring compliance with HFCU‘s Employee
Handbook. §e§ Parnar, 65 Haw. at 380, 652 P.2d at 631. Contrary
to Keomalu's argument, Kinoshita v. Canadian Pacific Airlines,
L;d¢, 68 Haw. 594, 724 P.2d 110 (1986), does not establish a
clear mandate of public policy prohibiting the violation of an
employee manual. Indeed, the HawaFi Supreme Court has held that
"Hawai7i law does not recognize tortious breach of contract
actions in the employment context." Francis v. bee Enterprises,
lng;, 89 HaWafi 234, 235, 244, 971 P.2d 707, 708, 717 (1999).
Other jurisdictions have concluded that internal company policies
or private standards do not establish a clear mandate of public
policy upon which to base a Parnar-type wrongful-discharge claim.
See Turner v. Anheuser~Bush, Inc., 876 P.2d 1022, 1033 (Cal.
1994); Javnes v. Centura Health Corp., 148 P.3d 241, 244-45
(Colo. Ct. App. 2006).
We also reject Keomalu's claim that his discharge by
HFCU violated public policy because it was done in contravention
of his rights to free speech and due process under the federal
constitution. The constitutional provisions that protect these
rights do not apply to actions by a federal credit union because
it is not a state actor. See Jesinqer v. Nevada Federal Credit
Union, 24 F.3d 1127, 1132 (9th Cir. 1994); Anderson v. Wiqqins,
460 F. Supp. 2d 1, 7 (D.C. Cir. 2006). Thus, Keomalu failed to
allege any cognizable constitutional violation upon which to
bring a public policy claim.
VII.
Keomalu argues that the circuit court erred in granting
HFCU's motion for judgment as a matter of law, pursuant to HRCP
Rule 50, on his claim of wrongful discharge in violation of
public policies contained in the HWPA. The HWPA states, in
relevant part, that:
An employer shall not discharge, threaten, or
otherwise discriminate against an employee regarding the
employee’s compensation, terms, conditions, location, or
privileges of employment because:
(1) The employee, or a person acting on behalf of
the employee, reports or is about to report to
the employer, or reports or is about to report
to a public body, verbally or in writing, a
violation or a suspected violation of:
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NOT P`OR PUBLICATION IN W `,S"I"S HAWAI‘I REPORTS AND PACII+`IC R.E.P()R'I`ER
(A) a law, rule, ordinance, or regulation,
adopted pursuant to law of this State, a
political subdivision of this State, or
the United States{.]
ana § 373-62 (supp. 2009>.
Keomalu argues that: (1) he was reporting violations or
suspected violations of state and federal laws when he told
Auyong to slow down the dealer loan program and when he objected
to the charging off of delinquent loans; and (2) because he was
discharged as a result of expressing concerns to Auyong about the
pace of the dealer loan program and objecting to HFCU‘s practice
'in charging off loans, his discharge violated public policies
contained in the HWPA. We disagree with Keomalu's arguments and
conclude that the circuit court properly granted HFCU's motion
for judgment as a matter of law.
Keomalu asserts that he told Auyong that the people
responsible for loans at HFCU were overwhelmed by the volume of
loan applications from the dealer loan program and he repeatedly
requested that HFCU slow down the dealer loan program. Evidence
that Keomalu told Auyong to slow down the dealer loan program
does not, however, amount to a report of a violation or suspected
violation of the law. Keomalu does not cite to any law that
prohibits HFCU from investing its resources in automobile loans
obtained through automobile dealers or that limits the volume of
loans that a credit union can take in as part of a dealer loan
program.
We reject Keomalu's contention that his complaints to
Auyong about the dealer loan program constituted a report of a
violation or suspected violation of the law because his
complaints pertained to the safety and soundness of HFCU.
Keomalu's attorney, when questioned by the circuit court,
acknowledged that there is no statute explicitly requiring safety
and soundness. Moreover, we decline to hold that general
expressions of concern about a credit union's or another
employer's business decisions constitute a report of a violation
or a suspected violation of the law sufficient to support a
whistleblower claim under the HWPA. To hold otherwise would
27
N()T I"OR PUTBI,.IC¢ATION lN WES'I"S HA\VAI‘I REP()R“I`S ANI) PACIP`ICT REP(`}R'I`ER
expose employers to liability whenever an employee voices a
general concern or reservation about an employer's business
decisions and later faces adverse employment action.
Keomalu argues that HFCU violated the law by charging
off certain delinquent automobile loans before insurance refunds
and proceeds from the sale of the automobile could be applied to
the deficiency. Keomalu contends that by prematurely charging
off the loans, HFCU violated federal law by misrepresenting its
financial condition. We disagree.
we conclude that HFCU's practice of charging off
certain delinquent loans before collecting all possible proceeds
did not result in an unlawful misrepresentation of HFCU's
financial condition. Rather, it provided examiners with a
conservative view of HFCU's financial condition. The effect of
HFCU's practice was to reduce the assets shown on HFCU's
financial statements below the amount that would have been shown
if the delinquent loans had not been charged off. After the
delinquent loans were charged off, nothing prevented the
subsequent collection of insurance refunds or proceeds from the
sale of the automobile. If collections could be made on the
charged-off delinquent loans, HFCU would be able to offset its
losses and update its financial records. There is no evidence
that HFCU sought to conceal the practice they employed in
charging off delinquent loans. Thus, Keomalu's complaints about
HFCU's practice of charging off certain delinquent loans did not
constitute a report of a violation or suspected violation of the
law.F
VIII.
Keomalu contends that the circuit court erred in
denying his motion for a new trial. This contention is based on
the same arguments he raised in claiming that the circuit court
W In this case, Keomalu failed to show that HFCU violated (1) the HWPA
or 12 U.S.C. § 1790b, the whistleblower provision of the Federal Credit Union
Act, or (2) the public policies contained in the HWPA or 12 U.S.C. § 1790b.
Moreover, the HWPA and 12 U.S.C. § 1790(b) contain remedies for violations of
their provisions, and thus they cannot provide the basis for a Parnar public
policy claim. §§§ HRS § 378-64 (1993); 12 U.S.C. § 1790b(C); Ross, 76 HawaiU.
at 463-64, 879 P.Zd at 1046-47; 'l‘akaki, 87 Ha.wai‘i at 63, 951 P.2d at 513.
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NOT F()R PUBLIC;&'I`}ON I,N WES'!"S IHAWAI°I REPOR'I`S AND PACH*`IC REP()RTER
erred in granting judgment as a matter of law, pursuant to HRCP
Rule 50, on his HWPA public policy claim against HFCU and his
defamation claim against Auyong. we have already concluded that
the circuit court properly granted judgment as a matter of law in
favor of HFCU and Auyong on these claims. Accordingly, we
likewise reject Keomalu's contention that the circuit court erred
in denying his motion for new trial.
CONCLUSION
we affirm the circuit court's April 6, 2006, final
judgment in favor of Defendants and against Keomalu on all claims
raised by Keomalu in his complaint.
DATED: Honolulu, Hawafi, February 2, 2010.
On the briefs:
R. Steven Geshe1l, 53 ` jH[ :2Z%AzQo4zLé4A`/
for David C. Farmer, Trustee ' '
for Plaintiff/Counterclaim Chief Judge
Defendant-Appellant €éZ;MJj¢7 ,»~ '
Jeffrey S. Harris and jig FF_
Heather M. Rickenbrode Associate Judge
(Torkildson, Katz, FonSeca,
Moore & Hetherington) /69 X2 »
for Defendant/Counterclaim é:ii§:j*““
Plaintiff/Third-Party Associate Jud
Plaintiff-Appellee Hickam
Federal Credit Union and
Defendant~Appellee Gerard
Auyong
Shelton G.W. Jim On and
Henry F. Beerman
(Jim On & Beerman)
for Defendant-Appellee
Stephen Y.H. Kwock
29