Farmer v. HICKAM FEDERAL CREDIT UNION

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 }<L*+.W'Aml‘ml $R¢EPOR'I`S ANI) PAC!F`¥C REP()RTE.R

of Keomalu’s performance. The first report stated that as of
December 3l, 2002, Kwock had identified "53 loans made by Mr.
Keomalu that appear to violate the loan policies of [HFCU] ord
that appear to have been granted to individuals who are not
creditworthy." The second report identified an additional 66
loans that had characteristics similar to the loans identified in
the first report. Based on Kwock's special audit reports,
Defendant-Appellee Gerard Auyong (Auyong), the President of HFCU,
submitted two proof~of~loss claims to HFCU’s insurer.i
Keomalu was subsequently terminated by HFCU on June 27,
2003, after he refused to resign. On April 21, 2004, Keomalu
brought a ten~count civil complaint against HFCU, Auyong, and
Kwock (collectively, "Defendants") alleging that: (1) Defendants
discriminated against Keomalu on the basis of race, age,
ancestry, and disability; (2) Defendants retaliated against
Keomalu because of his complaints regarding the discrimination;
(3) Defendants invaded Keomalu's privacy by placing him in a
false light; (4) Defendants negligently inflicted emotional
distress on Keomalu; (5) Defendants intentionally inflicted
emotional distress on Keomalu; (6) Auyong and Kwock conspired to
interfere with Keomalu's employment contract with HFCU; (7)
Auyong and Kwock conspired to violate clear mandates of public
policy resulting in Keomalu's wrongful discharge; (8) HFCU
wrongfully discharged Keomalu in violation of clear mandates of
public policy, including policies contained in the Hawaii
Whistleblowers' Protection Act (HWPA), Hawaii Revised Statutes
(HRS) Chapter 378, Part V; (9) HFCU breached an implied contract
regarding Keomalu's employment; and (lO) Auyong and Kwock defamed
Keomalu.F
The Circuit Court of the First Circuit (circuit court)W

dismissed of all of Keomalu‘s claims against the Defendants

through various pre-trial motions, except for Keomalu's claims of

y HFCU asserted a counterclaim against Keomalu and a third-party
complaint against Third-Party Defendants Cutter Pontiac, Buick, GMC of
Waipahu, Inc. and CJW Motors, Inc. These claims are not relevant to this
appeal and will not be further discussed.

F The Honorable Eden Elizabeth Hifo presided.

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NO'I` I*`OR PU'BLlC.»X'l`l()N {N WEST'S HAWAI‘I REPORTS ,AND PACH?`IC RPZPORT`|£,!{

defamation against Auyong and wrongful discharge in violation of
public policy contained in the HWPA against HFCU, which claims
proceeded to trial. Following the close of Keomalu's case~in~
chief, the circuit court granted Auyong’s and HFCU's motions for
judgment as a matter of law, pursuant to HawaFi Rules of Civil
Procedure (HRCP) Rule 50. Keomalu filed a motion for a new
trial. while this motion was pending, the circuit court issued a
final judgment, pursuant to HRCP Rule 54(b), in favor of
Defendants and against Keomalu on all claims raised by Keomalu in
his complaint. Keomalu filed a notice of appeal from this final
judgment. The circuit court subsequently denied his motion for
new trial.

During the pendency of Keomalu's appeal, Keomalu filed
for bankruptcy. David C. Farmer,F the trustee for Keomalu's
bankruptcy estate, was substituted for Keomalu as the Plaintiff-
Appellant. For simplicity, we will attribute the arguments made
by Plaintiff-Appellant on appeal to Keomalu.

On appeal, Keomalu argues that the circuit court erred
by: (1) dismissing the defamation claim against Kwock on summary
judgment; (2) granting Auyong's motion for judgment as a matter
of law on the defamation claim against Auyong and excluding the
testimony of CPA Everett Harry at trial; (3) dismissing the
invasion of privacy/false~light claim against Defendants; (4)
dismissing the claims for negligent infliction of emotional
distress (NIED) and intentional infliction of emotional distress
(IIED) against Kwock; (5) dismissing the claim that Auyong and
Kwock conspired to interfere with Keomalu's employment contract
with HFCU; (6) dismissing the claim against Auyong and Kwock for
conspiracy to violate public policy; (7) dismissing the claim
against HFCU for wrongful discharge in violation of public policy
(except for the portion of the claim based on the HWPA); (8)
granting HFCU's motion for judgment as a matter of law on the
claim of wrongful discharge in violation of public policy

y Farmer replaced Ronald K. Kotoshirodo, the former trustee of

Keomalu's bankruptcy estate.

N()T FOR PI.»'BLI(HX'I`\()N IN VVI*`.S'I"S HAVVA[‘] REPORTS ANI) P,ACH<`IC R‘EPORTER.

contained in the HWPA; and (9) denying Keomalu‘s motion for a new
trial. we affirm.
BACKGROUND
I.

During the period relevant to this case, HFCU was a
federal credit union that was chartered "for the purpose of
promoting thrift among its members and creating a source of
credit for provident or productive purposes." HFCU was subject
to the general direction and control of a Board of Directors
(Board), which consisted of nine members of HFCU who were elected
by the members of HFCU. HFCU generated income by lending money
to its members, depositing money into other financial
institutions in the form of certificates of deposits, and
collecting fees.

Keomalu began working at HFCU in 1982 as a collections
manager. In 1985, Keomalu became the Vice-President of Loans and
was responsible for supervising the loan department as well as
the credit and collections department. Auyong was appointed
Vice~President of operations in 1985 and became President of HFCU
in 1987.

Every twelve to eighteen months, the National Credit
Union Administration (NCUA) conducted an examination of HFCU's
books and records. In addition to the NCUA's examinations, HFCU
retained a CPA to conduct annual audits of its books. For at
least ten years, Kwock had been retained by HFCU to conduct the
annual audit.

HFCU was insured by CUMIS Insurance Society, Inc.
(CUMIS) under CUMIS'S FOrm 500 Credit Union Bond NO. 163-0089-1
(Bond). Under the Bond, CUMIS agreed to pay HFCU for HFCU‘s loss
of "covered property" resulting directly from a named employee's
"failure to faithfully perform his/her trust." The phrase
"failure to faithfully perform his/her trust" was defined to mean
"acting in conscious disregard of [HFCU's] established and
enforced share, deposit, or lending policies." The Bond had a
single loss limit of liability of $5,000,000 subject to a $10,000
deductible. '

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II.

In 200l, HFCU sought to generate more income by working
with automobile dealers to refer automobile loans to HFCU. As
HFCU formalized their dealer relationships, the volume of
automobile loans quickly expanded. HFCU went from 80 automobile
loans per month before the dealer loan program to over 300 per
month. Keomalu expressed concern over the volume of loans and
suggested establishing a dealer loan center, hiring additional
staff to handle the dealer loans, and slowing down the dealer
loan program. According to Keomalu, Auyong rejected these
suggestions.

By November 2001, Auyong started to become concerned
about the increasing percentage of loan delinquencies at HFCU.

In December 2001, Auyong attended a seminar put on by Rex Johnson
(Johnson) of Lending Solutions, Inc., who was an authority on
credit union lending. Auyong discussed the increased loan volume
at HFCU with Johnson. Upon reviewing about ten of HFCU's loans,
Johnson concluded that HFCU was not making "sound" loans.

HFCU loan policy regarding loan security for
automobiles, recreational vans, and trucks provided, in relevant
part:

a. Used -- up to the retail value, as listed in the
current Kelley Blue Book.

b. Brand New ~- up to 100% of invoice.

In a February 2002 memorandum to Keomalu, Auyong
reported that he had reviewed 40 loans and identified 26 loans in
which the loan amount exceeded the Kelly Blue Book (KBB) value or
the Manufacturer's Suggested Retail Price (MSRP), including 13
loans that exceeded the KBB or MSRP by 20% or more. In five
instances, a signature loan was made to cover the difference
between the KBB value and the price of the vehicle. Auyong also
observed problems with loan documentation~~many of the loan
applications were not signed by the approving loan officer and 9

loans files had no debt ratio worksheets~-and found that numerous

,loans had been made to individuals that lacked or had poor credit

scores. Auyong wrote that "[r}ecent circumstances have given

rise to the immediate need to evaluate [the dealer loan] program,

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N()T FOR PUBIJ(.'.A’I`[ON lN WES'I"S H,~R.WAI‘I REP()R'I`S AND PACII~`I`C RE`.POR'I`I#`,!{

and perhaps our lending in general, to make appropriate
modifications to protect our reserves."

On March 14, 2002, Auyong issued a memorandum notifying
Keomalu that Keomalu had been granted a pay raise based on his
performance evaluation for the period September 2000 through
September 2001. Keomalu's performance for that period had been
evaluated by his then supervisor, Cindy Geiling.

Auyong decided to take charge of the dealer loan
program in April 2002. He explained his decision and concerns
regarding the program in a May 2002 memorandum to Keomalu and
others. Among the concerns expressed by Auyong were that "61% of
the loan applications processed reflected persons with credit
reports less than the parameter that [HFCU] had established"F and
that loans had been made for vehicles that were overpriced, to
the apparent detriment of the member/borrower and HFCU, which
shared in the risk. Under the management change, Keomalu did not
have day-to-day responsibility for the dealer loan program, but
worked with Auyong as a policy setter, liaison with dealer
management, and overseer of the program.

At the end of July 2002, Keomalu looked at some of the
collection efforts on delinquent loans and noted that many
delinquent loans had no collection history. Keomalu directed the
collection manager, Lynne Elsman, to follow up on the delinquent
loans. Elsman prepared a list of delinquent loans and
recommended that certain loans be charged off the books and
assigned to a collection agency. Keomalu disagreed and contended
that delinquent loans should not be charged off before the refund
from the cancellation of insurance was collected and the
automobile was sold, because charging off loans before these
steps were taken would inflate HFCU's losses. Auyong agreed with

Elsman‘s recommendation to charge off the loans.

5 HFCU had established a Fair-Issac Company (FICO) credit score of 620
or more as a general condition that a loan applicant must satisfy for loan
approval.

NOT FO'I{ PU’BLICATION IN \‘S"P`.VS'I"S HAX\VAI‘I REP()RTS ANI) PACI‘I*`I(` REP()R“I`ER

III.

Delinquencies increased from O.39% of loans totaling
S739,16O in September 2001 to 2.22% of loans totaling $5,156,846
in August 2002. In an October 2002 memorandum, Auyong wrote to
Keomalu that the HFCU Board was concerned over the significant
increase in loan delinquencies and that "there is evidence that
weakness in both the underwriting of and collection of loans made
have contributed to the adverse financial condition of [HFCU]."
By letter to Auyong dated October l4, 2002, Johnson of Lending
Solutions, Inc. summarized his findings after reviewing examples
of loans made by HFCU. Johnson found numerous examples of non~
performing loans that "were way beyond what the most aggressive
credit union would ever have approved." Johnson stated that
"there were warning signs and red flags everywhere that were
ignored[;]" automobile loans "were granted well in excess of the
members['] annual income making it virtually impossible for the
member to pay"; certain loans referred by the dealer were of
extremely poor quality; HFCU loan practices were well beyond even
the most aggressive credit unions; and he believed HFCU's
decision making would result in significant losses over the next
two or three years. v

In response to the increasing loan delinquencies and
Johnson's negative review of HFCU's loan practices, the HFCU
Board decided to conduct a formal review of HFCU's lending
activities. To facilitate the review, Keomalu was placed on
administrative leave in October 2002. HFCU formed an Ad Hoc
Committee to oversee the review of its lending practices. In an
October 24, 2002, report to the Ad Hoc Committee, Auyong noted
that a review of HFCU's lending activities revealed, among other
things, missing loan documentation; loans made to members with
poor credit scores; loan files containing a second unsecured loan
in addition to the auto loan, which served to "circumvent Board
policy addressing loan~to-value conditions"; and poor management,
communication, and morale within the loan department.

On November 4, 2002, Sharon Sakamoto, vice-President of
finance at HFCU, called Kwock and asked him to review certain

loans made by HFCU. Based on Kwock's preliminary review of the

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N()T F()R PUBIJICA'I`!ON .IN \W"DXS'I"S l~~IAVVAI‘I RBIP()R'I`S ANI) P/\Cl`lf"l(f R`l'il[’()R'l`}£R

loans, Auyong signed and submitted to CUMIS a Notice of Loss Bond
on November 8, 2002, notifying CUMIS of potential losses
attributable to Keomalu. The notice estimated the loss from 30
loans HFCU reviewed as between $90,000 and $150,000 and stated
that there may be further losses not yet identified. The notice
included a statement on how the losses were caused, which

provided in relevant parts

The Credit Union‘s loan policies allow for auto loans to be
approved at an amount not to exceed lOO% of the current
Kelley Blue Book. The selling price (invoice) of the used
autos was in excess of the KBBV [(Kelley Blue Book Value)]
and as such, the loan officer(s) had issued two separate
loans. This scheme allowed one loan to be approved at an
amount equal to the KBBV and the second loan was approved to
pay for the difference between the KBBV and the invoice
price. In all of our sampled cases, we noted that the two
loans check [sic] were made payable to the dealers. The
effective result was that the two loans combined had
exceeded the KBBV, which is contrary to the Credit Union's
loan policy.

We identified additional schemes from scanning the recent
charged off auto loan files. One scheme involved loans made
to non-creditworthy individuals who had credit scores below
500. An explanation for approving a loan to such
individuals was not documented as required by the credit
union's policy. Another scheme involved auto loans
exceeding the fair market value of the collateralized auto.
. . Basically, it appears that auto loans were made to
individuals who were not creditworthy or that the auto loans
exceeded the collateral value, These additional schemes
need further investigation and corroborative evidence to
determine whether such activities are violation of the
credit union's policies and procedures and whether the
credit union realized a loss from such irregular activities.

IV.

On December 12, 2002, Kwock and HFCU entered into an
agreement identifying the procedures Kwock would use and the
scope of services he would provide in conducting a special audit
of HFCU's loan activities. Kwock agreed to perform agreed upon
procedures "for the purpose of determining whether [HFCU]
realized a loss as a result of irregular activities performed by
[Keomalu] . . . ." Kwock further agreed to "immediately apprise

[HFCU] when we locate evidence of [Keomalu‘s] disregard of

'[HFCU's] loan policies, which resulted in loss to your credit

union" and to "assist in sending a proof of loss claim to [CUMIS]

identifying the loss, if any . . . ."

NOT FOR PUBLI(M.TATI()N IN \VES'I"S HA`WAI‘I REPOR'I`S AND P!XCIFIC R}.CP()R'I"[ER

On December 3l, 2002, Kwock issued a special audit
report. In preparing the report, Kwock and his audit team
reviewed loans identified by HFCU staff; interviewed Keomalu and
other HFCU employees to determine their understanding of HFCU's
loan policies; read HFCU’s loan policies and procedures; and
obtained a list of auto loans with duplicate vehicle numbers
indicating two outstanding loans securing the same vehicle. The

report stated that

[Keomalu] violated key loan polices that were established by
[HFCU] to prevent poor loans. As of December 31, 2002, we
noted 53 loans made by Keomalu that appear to violate the
loan polices of [HFCU] or that appear to be granted to
individuals who are not creditworthy.

Kwock's report described two "schemes" that were used
with respect to the "irregular" loans made by Keomalu. The first
"scheme“ involved "combo loans" in which an automobile loan was
combined with a signature loan to pay for a used automobile that
cost more than the retail KBBV. The report found that the combo
loans "appeared to violate" HFCU's policy of limiting loans for
used automobiles to the retail KBBV because the combined total of
the two loans exceeded the KBBV. The report reasoned that the
purpose of HFCU's policy was to avoid committing HFCU to
"unacceptable risk."

The report noted that Kwock had initially found 15
combo loans that not only were granted outside HFCU's policies
but were made to people with poor credit scores. The report
referenced Keomalu's position that as long as the member could
qualify for both the used automobile loan and the signature loan,
the combo loan would not violate HFCU's policies. According to
Keomalu's explanation, the used automobile loan could be made up
to the KBBV and the signature loan could be made to cover dealer
additions such as Guaranteed Auto Protection (GAP) insurance
premiums, extended warranties, and upgrades in accessories. The
report noted, however, that the combo loans were not made in a
manner consistent with Keomalu's explanation. Kwock found
numerous combo loans in which the auto loan amount exceeded the
KBBV and the signature loan amount exceeded the cost of the

dealers' additions.

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The second “scheme" involved Keomalu's granting used
automobile loans to members purchasing automobiles that HFCU had
repossessed from other members. The loans to purchase the
repossessed automobiles consistently exceeded the KBBV and were
often made to members with low credit ratings. Instead of using
the proceeds from the used automobile loan to pay off the
defaulted loan for the repossessed automobile, the proceeds were
given to the dealer who sold the automobile. The report found
that HFCU did not have a formal consignment agreement with the
dealer regarding the sale of the repossessed automobile. The
amount paid by the dealer to HFCU for the repossessed automobile
was consistently less than the proceeds of the used automobile
loan. In addition, there was a significant time lag between the
making of the used automobile loan and the dealer's payment which
was used to pay off the first automobile loan. This time lag
resulted in HFCU having two outstanding loans to different
members secured by the same automobile.

The report identified 53 "irregular" loans made by
Keomalu pursuant to the two "schemes" that represented a total of
$529,630.26 in outstanding loans. Kwock's report recommended
that HFCU submit a proof-of~loss claim to CUMIS in the amount of
$529,630.26 as "provable loan losses" for these 53 loans. The
report, however, recognized that only 5 of the 53 loans had been
charged off, 3 were in repossession, 13 were delinquent, and the
remaining 32 were not past due as of the date of the report.

On January 9, 2003, Auyong submitted a proof-of-loss
claim to CUMIS in the amount of $529,630.26 based on Keomalu's
"lack of faithful performance." Attached to the proof-of~loss
claim was Kwock's December 31, 2002 special audit report. On
January 24, 2003, CUMIS advised HFCU that the proof-of~loss claim
was deficient because it sought compensation for loans that were
not yet charged off and thus were not actual losses.

Kwock issued a second special audit report on February
1l, 2003, which listed HFCU loans that resulted in actual, rather
than potential, losses. Kwock identified 66 additional loans
that had characteristics similar to the two schemes previously

reported, which included 45 loans that had been charged off for a

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total actual loss of $247,480.94. The 45 charged~off loans
consisted of 24 under the combo loan scheme, 5 in which a single
used automobile loan was granted above the retail KBBV, and 16
under the scheme involving duplicate loans for repossessed
automobiles, when combined with the 5 charged~off loans
identified in the first report, the total actual loss for the
charged»off loans related to the two schemes was $29l,973.39.

The second report concluded that "[i]t appears that [HFCU]
incurred a loss because the loans were made outside of policy and
the loans were granted at above the fair market value of the
collateral." The second report anticipated that there may be
additional losses because there were still loans that fit into
the two schemes that had not been charged off. The second report
recommended that HFCU submit the report to CUMIS as an amended
proof-of~loss claim.

Based on Kwock's second report, HFCU submitted an
amended proof-of~loss claim to CUMIS on March 3, 2004, for
$291,973.39. By letter dated September 4, 2003, CUMIS denied
HFCU‘s amended claim on the grounds that (l) HFCU had not
demonstrated that "Keomalu failed to faithfully perform his
trust" and (2) HFCU did not timely file its claim following the
discovery of the alleged loss,

V.

On January 29, 2003, HFCU's Board dissolved the Ad Hoc
Committee, and the Board assigned the responsibility for
reviewing HFCU's lending practices to the Supervisory Committee
and the responsibility for reviewing the human resources issues
to the Personnel Committee. Neither Auyong nor Kwock was a
member of the Personnel Committee. On June 6, 2003, the
Personnel Committee submitted its report to the Board. The
report concluded that:

a. [Keomalu] did not perform in his capacity as Vice
President, Loans to provide effective leadership for
the Loan and Credit Departments as well as the
employees under his area of responsibility;

b. [Keomalu] did not perform in his capacity as a lending
officer, as delegated by the Board of Directors, to
exercise prudent judgment in the underwriting and
processing of loans; and

ll

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C.

[Keomalu] did not provide for member service, by
"expediting" the purchase of "overpriced" vehicles to
members; i.e. "encouraging" members to buy a car
(financed by HFCU) when it was a “bad“ deal for the
member.

The Personnel Committee recommended that Keomalu be given the

opportunity to resign and, if he was unwilling to resign, that he

be fired.

On June 19, 2003, the Board gave Keomalu the choice of

either resigning or being fired.

Upon refusing to resign,

Keomalu's employment was terminated effective June 27, 2003.

A.

reviewed de novo.
¢L¢
Hawa1i 401,

1n re Estate of Roqers,

l190,

ellipsis in original)

Countv of Kauad.v; Baptiste,

925 (2007).
B.

STANDARDS OF REVlEW

Motion to Dismiss

A circuit court‘s ruling on a motion to dismiss is
Wriqht v. Home Depot U.S.A., Inc., 111
406-O7, 142 P.3d 265, 270~71 (2006).
A complaint should not be dismissed for failure
to state a claim unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of
his or her claim that would entitle him or her to
relief. This court] must therefore view a plaintiff's
complaint in a light most favorable to him or her in
order to determine whether the allegations contained
therein could warrant relief under any alternative
theory. For this reason, in reviewing [a] circuit
court's order dismissing [a] complaint [this
court‘s] consideration is strictly limited to the
allegations of the complaint, and [this court] must
deem those allegations to be true.

103 HawaF1 275, 280-81, 81 P.3d
(citations omitted) (some brackets and
(some brackets added).

1195~96 (2003)

115 Hawai‘i 15, 24, 165 P.3c1 916,

Summary Judgment

"We review the circuit court’s grant or denial

of summary judgment de novo," Querubin v. Thronas, 107
Hawafi 48, 56, 109 P.3d 689, 697 (2005), using the
same standard applicable to the circuit court.

1ddings v, Mee-Lee, 32 Hawari 1, 5, 919 P.2d 2e3, 267
(l996). Summary judgment is proper 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
a judgment as a matter of law." Hawafi Rules of
Civil Procedure (HRCP) Ru1e 56(c).

Once the moving party has satisfied its initial

burden of showing the absence of a genuine issue of
material fact and its entitlement to a judgment as a

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N()'l` F()R PUI?¢LICA'I`ION IN WES'I"S HA\N’AI‘I REPORTS ANI) PAC[FIC REPORTER

matter of law, the opposing party "may not rest upon
the mere allegations or denials of [the opposing
party's] pleading" but must come forward, through
affidavit or other evidence, with "specific facts
showing that there is a genuine issue for trial."
HRCP Rule 56(e). if the opposing party fails to
respond in this fashion, the moving party is entitled
to summary judgment as a matter of law. Hall v,
State, 7 Haw. App. 274, 284, 756 P.2d lO48, 1055
(1988); see also HRCP 56(e).

Wittig v. Allianz, A,G., 112 Hawaid.195, 200, 145 P.3d 738,
743 (App. 2006).

A summary judgment motion challenges the very
existence or legal sufficiency of the claim or defense
to which it is addressed. In effect the moving party
takes the position that he is entitled to prevail
because his opponent has no valid claim for relief or
defense to the action, as the case may be. He thus
has the burden of demonstrating that there is no
genuine issue as to any material fact relative to the
claim or defense and he is entitled to judgment as a
matter of law.

First Hawaiian Bank v. Weeks, 70 Haw. 392, 396, 772 P.2d
1187, 1190 (1989) (quotation marks, ellipsis points, and
citations omitted).

Where the party defending the action (who does not
have the burden of proof) moves for summary judgment,

[h]e may discharge his burden by demonstrating that if
the case went to trial there would be no competent
evidence to support a judgment for his opponent. For
if no evidence could be mustered to sustain the
nonmoving party's position, a trial would be useless.

Id. at 396-97, 772 P.2d at 1190. (quotation marks, ellipsis
points, brackets, and citations omitted).

In construing Federal Rules of Civil Procedure (FRCP)
Rule 56(c), on which Hawai‘i Rules of Civil Procedure (HRCP)
Rule 56(c) is modeled, the United States Supreme Court has
stated:

In our view, the plain language of [FRCP] Rule 56(c)
mandates the entry of summary judgment, after adequate
time for discovery and upon motion, against a party
who fails to make a showing sufficient to establish
the existence of an element essential to that party's
case, and on which that party will bear the burden of
proof at trial. In such a situation, there can be no
genuine issue as to any material fact, since a
complete failure of proof concerning an essential
element of the nonmoving party‘s case necessarily
renders all other facts immaterial. The moving party
is entitled to a judgment as a matter of law because
the nonmoving party has failed to make a sufficient
showing on an essential element of her case with
respect to which she has the burden of proof.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986) (quotation marks omitted).

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NOT I*`()R PUBL[CA'I`¥ON IN W'ES'I"S HAWAI‘I REPORTS ANI) PACIFIC REP()RTI£I{

wilson v.

<APp»

KIam€I VI

(internal quotation marks,

2009)

"A party opposing a motion for summary judgment
cannot discharge his or her burden by alleging
conclusions, ’nor is [that party] entitled to a trial
on the basis of a hope that fha or she] can produce
some evidence at that time.‘" Henderson v. PrQ§;l
COatingS COrp., 72 Haw. 387, 40l, 819 P.2d 84, 92
(l991) (quoting 1OA Charles Alan Wright, Arthur R.
Miller & Mary Kay Kane, Federal Practice and
Procedure: Civil 2d § 2727 (1983)).

121 HaWaFi l20, 214 P.3d 11lO, 1117

(brackets in original).

Freitas, l27,

C. Judgment as a Matter of Law (HRCP Rule 50)

[I]t is well settled that a trial court's rulings on motions
for judgment as a matter of law are reviewed de novo. when
reviewing a motion for judgment as a matter of law, the
evidence and the inferences which may be fairly drawn
therefrom must be considered in the light most favorable to
the nonmoving party and the motion may be granted only where
there can be but one reasonable conclusion as to the proper
judgment,

121 P.3d 406, 410 (2005)

and brackets omitted).

103 Hawafi 426, 430,

citations,

Ellett,

DISCUSSION
I.

Keomalu argues that the circuit court erred in

determining that there was no genuine issue of material fact that

Kwock was protected by a qualified privilege and in granting

Kwock's motion for summary judgment on Keomalu's defamation

claim.

We disagree.

We conclude that Kwock was protected by a

qualified privilege and was entitled to summary judgment on

Keomalu‘s defamation claim.

A plaintiff must establish the following four elements

to sustain a claim for defamation:

Gold v. Harrison,

a) a false and defamatory statement concerning another;
b) an unprivileged publication to a third party;
c) fault amounting at least to negligence on the part of

the publisher [actua1 malice where the plaintiff is a
public figure]; and

d) either actionability of the statement irrespective of
special harm or the existence of special harm caused

by the publication.

88 HaWafi 94, lOO, 962 P.2d 353, 359 (1998)

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(brackets in original) (quoting Dunlea v. Dappen, 83 HawaFi 2B,
36, 924 P.2d 196, 204 (l996)}. Thus, among the elements of proof
that the plaintiff must establish is that the defendant made "an
unprivileged publication to a third party." lQg

Even if a statement is defamatory, the author of the
statement is protected by a qualified privilege when he or she
"reasonably acts in the discharge of some public or private duty,
legal, moral, or social, and where the publication concerns
subject matter in which the author has an interest and the
recipients of the publication a corresponding interest or duty."
Russell v. American Guild of Variety Artists, 53 Haw. 456, 460,
497 P.2d 40, 44 (l972). whether a particular communication is
privileged is "an issue of law to be determined by the court."
Kainz v. Lussier, 4 Haw. App. 400, 405, 667 P.2d 797, 802 (l983).

A qualified privilege can be lost if the defendant
abused the privilege by acting with malice. Towse v. State, 64
HaW. 624, 632~34, 647 P.2d 696, 702-04 (l982); §§§ RuSSell, 53
Haw. at 463 & n.4, 464, 497 P.2d at 45 & n.4, 46. The Hawafi
Supreme Court has adopted a reasonable person test for
determining malice. Towse, 64 Haw. at 632-33, 647 P.2d at 702-
O3; Russell, at 463 n.4, 497 P.2d at 45 n.4.

Thus, in the instance where malice is alleged to extinguish
a qualified privilege, defendant is required to act as a
reasonable man under the circumstances, with due regard to
the strength of his belief, the grounds that he has to
support it, and the importance of conveying the information.

Towse, 64 Haw. at 632-33, 647 P.2d at 703 (internal quotation
marks and citation omitted).

On appeal, Keomalu does not dispute that Kwock was
entitled to the protection of a qualified privilege in preparing
and submitting the two special audit reports to HFCU. Instead,
Keomalu argues that Kwock acted with malice and therefore lost
any qualified privilege. Keomalu contends that there are
material issues of fact regarding whether Kwock acted with malice
which preclude the grant of summary judgment, we disagree and
conclude that there is no genuine issue as to any material fact

that Kwock did not act with malice.

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In preparing the reports, Kwock and his team (1)
conducted an extensive review of loans made by HFCU, including
loans identified by HFCU staff that related to loans granted to
members who had poor credit or were supported by inadequate
documentation; (2) interviewed Keomalu and other HFCU employees
to determine their understanding of HFCU's loan policies; (3)
read HFCU's loan policies and procedures; and (4) obtained a
listing of automobile loans with duplicate vehicle identification
numbers. Kwock's special audit reports include the basis for
Kwock‘s conclusion that Keomalu appeared to have violated HFCU's
loan policy and Kwock's method for calculating the amount of loss
Kwock recommended that HFCU include in its claims to CUMIS.
Keomalu does not contend that Kwock failed to perform the
interviews and research Kwock claimed.

Keomalu asserts that he did not violate HFCU's loan
policies and that Kwock's contrary conclusion created a material
issue of fact regarding malice. we disagree. whether Keomalu's
loan practices violated HFCU's policy of limiting used automobile
loans to the retail KBBV was a matter of interpretation. Auyong
agreed with Kwock that Keomalu's loan practices violated and
circumvented the intent of that policy, which was designed to
protect HFCU against loaning more than the value of the
automobile. Other HFCU loan officers also expressed concern
about the validity and soundness of Keomalu's loan practices.

The dispute over how to interpret HFCU's loan policy
did not create a material issue of fact regarding malice. Even
if Kwock's interpretation of HFCU's loan policies was subject to
challenge or could be proven to be wrong, this would not
demonstrate that Kwock acted with malice. The record established
that Kwock had reasonable grounds to support the conclusions he
reached in the audit reports. There was no genuine issue of fact
that Kwock acted as a reasonable person under the circumstances
with due regard to the strength of his belief, the grounds he had
to support it, and the importance of conveying the information.

we also reject Keomalu's claim that the report of his
accounting expert, Everett Harry (Harry), which contain an

analysis of Kwock's special audit reports, created a material

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issue of fact regarding malice. In his report, Harry, among
other things, (l) contends that Kwock incorrectly characterized
Kwock’s reports as "special audit" reports, (2) opines that Kwock
failed to comply with professional standards regarding the
required elements for a special audit report or an agreed~upon
procedures report, and (3) disagrees with Kwock's conclusions.
However, in his agreement with HFCU, Kwock described the
limitations in the scope of services he would provide in
conducting the special audit, including that the procedures he
agreed to perform “will not constitute an audit made in
accordance with generally accepted auditing standards." Kwock
also detailed the investigation he undertook in preparing his
reports and explained the basis for his opinions. we conclude
that Harry's report does not serve to create a genuine issue of
material fact regarding whether Kwock acted without malice.
II.

For similar reasons, we conclude that the circuit court
did not err in granting judgment as a matter of law, pursuant to
HRCP Rule 50, on Keomalu's claim that Auyong defamed Keoma1u by
submitting the proof-of-loss claims to CUMIS. Auyong was also
protected by a qualified privilege because as President of HFCU,
he had a duty to take action and attempt to recover losses
sustained by the HFCU due to "bad" loans made by Keomalu and
those under Keomalu's supervision. Auyong filed the proof-of~
loss claims with CUMIS based on Kwock's reports and the
authorization of the HFCU Board. Keomalu's theory that Auyong
falsely blamed Keomalu for the bad loans to protect Auyong‘s own
job was not supported by sufficient evidence to raise a viable
claim of malice on Auyong's part.

The circuit court's exclusion of Harry's testimony at
trial does not provide Keomalu with any basis for relief. Harry
conducted his evaluation of Kwock‘s special audit reports long
after Auyong submitted the proof~of-loss claims to CUMIS.
Harry's testimony would not have served to show that Auyong
should have doubted the validity of the conclusions reached by
Kwock in Kwock's special audit reports. Thus, Harry's testimony

could not have served to overcome Auyong's qualified privilege,

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Ill.

The same qualified privilege that bars Keomalu's
defamation claim against Kwock and Auyong also bars Keomalu‘s
claim against Defendants for invasion of privacy for placing him
in a false light (false-light claim) and Keomalu‘s claims against
Kwock for NIED and IIED. The policy concerns that justify the
recognition of a qualified privilege in defamation cases also
support the recognition of a qualified privilege in false-1ight,
NIED, and IIED cases that are based on allegedly false and
disparaging communications. §e§ Russell, 53 Haw. at 459-61, 497
P.2d at 43-44; Hines v. Arkansas Louisiana Gas Co., 613 So. 2d
646, 658 (La. Ct. App. 1993); wallin v. Minnesota Dep't of
Corrections, 598 N.w.2d 393, 406 (Minn. Ct. App. (l999).

Courts have held that where a false-light claim is
based on the same statements as a defamation claim, the false-
light claim must be dismissed if the defamation claim is
dismissed. §Qldy 88 Hawafi at 103, 962 P.2d at 362; McClatchy
Newspapers, Inc. v. Superior Court, 234 Ca1. Rptr. 702, 704 (Cal.
Ct. App. 1987). The same is true of emotional distress claims
that are derived from or are "parasitic" of a defamation claim.
Basilius v. Honolulu Pub1ishinq Co., 711 F. Supp. 548, 552 (D.
Haw. 1989); see QQld, 88 Haw. at 103, 962 P.2d at 362; wallin,
598 N.w.2d at 406.

Here, Keomalu's false-light, NIED, and IIED claims are
based on essentially the same factual foundation as his
defamation claim. Thus, our conclusion that the circuit court
properly resolved Keomalu's defamation claim means that it also
properly resolved Keomalu's false-light, NIED, and IIED claims.

Moreover, there are additional grounds supporting the
circuit court's dismissal of Keomalu's false-light, NIED, and
IIED claims, which we discuss below.

A. False-light claim

The circuit court properly dismissed Keomalu's false-
light claim because Keomalu failed to allege a sufficient degree
of publicity. The false-light tort is defined in the Restatement
(Second) of Torts (Restatement) § 652E as follows:

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One who gives publicity to a matter concerning another
that places the other before the public in a false light is
subject to liability to the other for invasion of his
privacy, if

(a) the false light in which the other was
placed would be highly offensive to a reasonable
person, and 1

(b) the actor had knowledge of or acted in
reckless disregard as to the falsity of the publicized
matter and the false light in which the other would be
placed.

Restatement § 652E (1997) (cited in Chunq v. McCabe Hamilton &
Renny Co., 109 Hawafi 520, 534 n.l8, 128 P.3d 833, 847 n.18
(2006)).

Comment a to Restatement § 652E refers to and applies
the definition of "publicity" found in Comment a to Restatement
§ 652D. Comment a to Restatement § 652D explains that,
"'[p]ublicity,' . . . means that the matter is made public, by
communicating it to the public at large, or to so many persons
that the matter must be regarded as substantially certain to
become one of public knowledge." Restatement § 652D comment a.

Therefore,

it is not an invasion of the right of privacy . . . to
communicate a fact . . . to a single person or even to a
small group of pers0ns. On the other hand, any publication
in a newspaper or a magazine, even of small circulation, or
in a handbill distributed to a large number of persons, or
any broadcast over the radio, or statement made in an
address to a large audience, is sufficient to give publicity
within the meaning of the term as it is used in this
Section. The distinction, in other words, is one between
private and public communication.

Id.
Keomalu's complaint did not allege a sufficient degree

of publicity to sustain his false-light claim. In paragraph 16
of his complaint, Keomalu alleges that Defendants
"[d]iscredit[ed] [Keomalu] in the eyes of the [HFCU] employees
with false and defamatory accusations of incompetence" and
"creat[ed] a false impression in the eyes of employees that
[Keomalu] was incompetent and making bad loans and collections
decisions . . . ." The limited degree of publicity alleged is
confined to HFCU employees, and there is no allegation that

information which purportedly placed Keomalu in a false light was

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communicated to so many people that it was substantially certain
to become public knowledge.W See Pace v. Bristol Hosp., 964 F.
Supp. 628, 630~32 (D. Conn. 1997). Therefore, the circuit court
properly dismissed Keomalu's false-light claim because Keomalu‘s
complaint failed to allege a sufficient degree of publicity to
support that claim.

B. NIED Claim

The circuit court properly dismissed Keomalu's NIED
claim against Kwock on the ground that Kwock owed no legal duty

to Keomalu. A claim for NIED "is nothing more than a negligence

yclaim in which the alleged actual injury is wholly psychic and is

analyzed utilizing ordinary negligence principles." Doe Parents
No. 1 v. State, Dep't of Educ., 100 HawaiH.34, 69, 58 P.3d 545,
580 (2002)(internal quotation marks and citation omitted). "[A]
prerequisite to any negligence action is the existence of a duty
owed by the defendant to the plaintiff[] that requires the
defendant to conform to a certain standard of conduct for the
protection of the plaintiff against unreasonable risks. ld4 at
71, 58 P.3d at 582 (quotation marks, brackets, and citations
omitted).

With respect to a negligence claim, "a duty is owed
when, considering the policies favoring recovery against those
limiting liability, the sum total of those policies leads the law
to say that a particular plaintiff is entitled to protection."
Blair v. Ing, 95 HawaiW_247, 270, 21 P.3d 452, 475 (200l). And
"a new duty will not be imposed upon members of society without a
logical, sound, and compelling reason." ld; In determining
whether an accountant owes a legal duty of care to a non-client,
courts must consider:

(1) the extent to which the transaction was intended to affect the
plaintiff; (2) the foreseeability of harm to the plaintiff; (3)
the degree of certainty that the plaintiff suffered injury; (4)
the closeness of the connection between the defendant’s conduct
and the injury; (5) the policy of preventing future harm; and (6)

9 Indeed, the record reflects that the special audit reports were
disseminated to officers and directors of HFCU who had a professional interest
in the audits, and not to the employees of HFCU in general. Moreover, even if
the subsequent dissemination to CUMIS is considered, it would not demonstrate
that the reports were communicated to the public at large.

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whether imposing liability imposed an undue burden upon the
profession.

Id.

In Blair, the plaintiffs were the co~trustees and
beneficiaries of a trust created by their parents. ;d; at 250-
51, 21 P.3d at 455~56. Plaintiffs sued an accountant who had
been hired by plaintiffs' mother to prepare the estate tax
returns for plaintiffs' father. ;d; at 251, 21 P.3d at 456.
Plaintiffs alleged that the accountant was negligent because he
failed to utilize tax saving techniques that would have reduced
the estate taxes owed by plaintiffs' parents‘ estate. ldg Based
on its review of the record, the Hawafi Supreme Court concluded
that there was no genuine issue of material fact that plaintiffs'
mother had retained the services of the accountant for the
preparation of estate tax returns, and not for estate tax advice.
lQ; at 267-70, 21 P.3d at 472-75. The court therefore determined
that plaintiffs were not intended beneficiaries of the agreement
and relationship between the accountant and plaintiffs' mother.
;d; at 268, 270, 21 P.3d at 473, 475. The court declined to
impose a legal duty on the accountant to plaintiffs under these
circumstances. ld; Based on the absence of a legal duty owed by
the accountant to plaintiffs, the court held that, as a matter of
law, the accountant was entitled to summary judgment in his favor
on plaintiffs' negligence claim. ;d4

Similarly, Kwock did not owe a legal duty of care to
Keomalu. Keomalu was not a party to the agreement between Kwock
and HFCU. Kwock was hired by HFCU to conduct a special audit of
HFCU's and Keomalu's loan activities for the benefit of HFCU, and
Keomalu was not an intended beneficiary of the Kwock-HFCU
contract. Furthermore, imposing on Kwock a legal duty to Keomalu
under the circumstances of this case would likely create an undue
burden on the accounting profession. Kwock's special audit
reports were intended to be an external review conducted by Kwock
to assist HFCU in identifying problems in its lending practices
and procedures. If accountants were exposed to potential
liability for claims brought by anyone who may be negatively
impacted by such a review, it would have a chilling effect on the

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willingness of accountants to undertake special audits and to be
candid in performing them.

we conclude that Kwock did not owe a legal duty to
Keomalu, §ee id; Semida v. Rice, 863 F.2d 1156, 1160 (4th Cir.

1988). The circuit court was therefore correct in dismissing

Keomalu's NIED claim against Kwock.

C. I1ED Claim

Keomalu's claim of 11ED against Kwock was based on
Kwock's special audit reports. The elements of proof for an IIED
claim are: "1) that the act allegedly causing the harm was
intentional or reckless, 2) that the act was outrageous, and 3)
that the act caused 4) extreme emotional distress to another."
Hac v. University of Hawaii, 102 Hawaid.92, 106~07, 73 P.3d 46,
60~61 (2003). As a matter of law, Keomalu could not prove that
Kwock's conduct was outrageous. See Shoppe v. Gucci America
lQg., 94 Haw. 368, 387, 14 P.3d 1049, 1068 (2000). The circuit
court properly granted Kwock's motion to dismiss and/or for
partial summary judgment on Keomalu's IIED claim against Kwock.

IV.

Keomalu argues that the circuit court erred by

dismissing his claim against Kwock and Auyong for conspiring to

interfere with his employment contract with HFCU.

The requisite elements of tortious interference with
contractual relations are: 1) a contract between the
plaintiff and a third party; 2) the defendant's knowledge of
the contract; 3) the defendant's intentional inducement of
the third party to breach the contract; 4) the absence of
justification on the defendant's part; 5) the subsequent
breach of the contract by the third party; and 6) damages to
the plaintiff .

Meridian Mortqaqe, Inc. v. First Hawaiian Bank, 109 HawaFi 35,
44, 122 P.3d 1133, 1142 (App. 2005) (brackets and emphasis
omitted) (quoting Weinberq v. Mauch, 78 HawaiT_40, 50, 890 P.2d
277, 237 (1995)>.

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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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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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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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:

26

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