Lales v. Wholesale Motors Co.

• Decision Date: 13 February 2014
• Docket Number: No. SCWC–28516.,SCWC–28516.
• Court: Hawaii Supreme Court
• Parties: Gerard R. LALES, Respondent/Plaintiff–Appellant, v. WHOLESALE MOTORS COMPANY, dba JN Automotive Group, Johnny Martinez, and Gary Marxen, Sr., Petitioners/Defendants–Appellees.

133 Hawai'i 332

328 P.3d 341

Gerard R. LALES, Respondent/Plaintiff–Appellant,

v.WHOLESALE MOTORS COMPANY, dba JN Automotive Group, Johnny Martinez, and Gary Marxen, Sr., Petitioners/Defendants–Appellees.

No. SCWC–28516.

Supreme Court of Hawai‘i.

Feb. 13, 2014.

Christopher J. Muzzi, Honolulu, for petitioner.

Daphne E. Barbee, Honolulu, for respondent.

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 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, 127 Hawai‘i 412, 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 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, 118 S.Ct. 2275, 141 L.Ed.2d 662 (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 Hawai‘i'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 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 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[.]"

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 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.

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....