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Nakamoto v. Kawauchi

Supreme Court of Hawaii

May 8, 2018

PATRICIA NAKAMOTO, Petitioner/Plaintiff-Appellant,
v.
JAMAE KAWAUCHI, in her individual and official capacity as County Clerk, DOMINIC YAGONG, in his individual and official capacity as Chairman, Hawai'i County Council, County of Hawai'i, CORPORATE SPECIALIZED INTELLIGENCE AND INVESTIGATIONS LLC, Respondents/Defendants-Appellees. (Civil No. 12-1-0466) SHYLA A. AYAU, Petitioner/Plaintiff-Appellant,
v.
JAMAE KAWAUCHI, in her individual and official capacity as County Clerk, DOMINIC YAGONG, in his individual and official capacity as Chairman, Hawai'i County Council, County of Hawai'i, CORPORATE SPECIALIZED INTELLIGENCE AND INVESTIGATIONS LLC, Respondents/Defendants-Appellee. (Civil No. 12-1-0467)

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-13-0004947)

          Ted H.S. Hong for petitioner

          Laureen L. Martin for respondents County of Hawai'i, and Jamae Kawauchi and Dominic Yagong, in their official capacities

          Jill D. Rasnov for respondents Jamae Kawauchi and Dominic Yagong, in their individual capacities

          Jodie D. Roeca for respondent Corporate Specialized Intelligence and Investigations, LLC

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

          OPINION

          RECKTENWALD, C.J.

         I. Introduction

         This case concerns common law tort claims in the employment context. Petitioners Patricia Nakamoto and Shyla M. Ayau (collectively, "Petitioners") were employees of the County of Hawai'i (the County), whose employment was terminated following an investigation into alleged employee misconduct, including the use of a County Elections Office warehouse for private business purposes and to hold parties at which alcohol was consumed. An article was published in a local newspaper about the terminations, which quoted County officials, Respondents Jamae Kawauchi (Kawauchi) and Dominic Yagong (Yagong), as making various statements about the terminations.

         Petitioners brought the present action against the County, Kawauchi and Yagong in both their official and individual capacities, and Corporate Specialized Investigations and Intelligence Services, LLC (CSII), a licensed private investigation company which the County hired to conduct the investigation. Petitioners alleged that the defendants had caused defamatory statements about them to be published in the local newspaper, and that the investigation had been conducted negligently.

         The circuit court granted the County's motion to dismiss, finding that Petitioners' claims were barred by the Workers' Compensation Law (WCL) because Petitioners' alleged injury to their reputations arose through the course and scope of their employment.[1] The circuit court also granted summary judgment in favor of Kawauchi and Yagong, finding that Petitioners had failed to adduce evidence raising a genuine issue of material fact that Kawauchi and Yagong had made false statements about them. Finally, the circuit court granted summary judgment in favor of CSII, finding that as a third-party investigator, it had no duty towards Petitioners.

         Petitioners appealed to the Intermediate Court of Appeals (ICA), which affirmed the circuit court in all respects, except that it held that the circuit court erred in holding that allegedly defamatory statements made after termination were barred by the WCL. However, the ICA did not vacate the circuit court's grant of the motion to dismiss, because it held as a matter of law that Kawauchi's and Yagong's alleged defamatory statements were true.

         On certiorari, Petitioners raise several issues. They argue that the ICA erred in holding that the WCL exclusivity provision covers reputational injuries. Petitioners also argue that the ICA erred in holding that Kawauchi's and Yagong's statements were true as a matter of law. Finally, Petitioners argue that the ICA erred in holding that CSII did not owe a duty to Petitioners to conduct an objective investigation.

         First, based on the language and purpose of the statute, we hold that the WCL's bar on claims for injuries incurred in the course of employment does not extend to injuries to a person's reputation. Accordingly, employees may bring defamation and false light claims against their employers.

         Second, we affirm summary judgment in favor of Kawauchi, but vacate summary judgment in favor of Yagong in his individual capacity, because we conclude that whether Yagong's allegedly defamatory statements were true involves a disputed question of material fact. Accordingly, we also vacate the circuit court's dismissal of Petitioners' defamation and false light claims against the County and Yagong in his official capacity, as Petitioners can assert those claims based on our holding that those claims are not barred by the WCL.

         Finally, we conclude that CSII owed a legal duty of care to Petitioners, because we hold that licensed private investigators owe a duty of care to the subjects of their investigations. We vacate and remand for a determination of whether CSII breached that duty.

         II. Background

         A. Circuit Court Proceedings

         Nakamoto and Ayau filed separate complaints in circuit court. Both complaints named as defendants Kawauchi and Yagong in their official and individual capacities, the County, CSII, and Doe individuals and entities.

         1. Allegations in the Complaints

         Taken together, the complaints give the following account of the termination of Petitioners' employment at the County. Nakamoto began her employment at the County of Hawai'i Elections Division in 1982, and her title was Election Programs Administrator when she was fired. Ayau was hired as a full-time elections clerk in 2005, and at the time her employment was terminated, her title was Senior Elections Clerk.

         In July 2011, Kawauchi, who was the County Clerk, and Yagong, who was the County Council Chairman, inspected a privately-owned warehouse in Hilo that had been leased to the County to store equipment for the Office of Elections. There they "observed items that they concluded were violations of County policies"; they subsequently "identified and targeted" Petitioners and other County employees "to be terminated." Kawauchi and Yagong hired CSII to investigate the apparent violations of County policy, and they "pre-determined a particular course of action" against Petitioners and other County employees.

         CSII conducted its investigation, and in September 2011, it submitted an "Investigative Report, " which Petitioners attached as an exhibit to their respective complaints. The report indicated that a County employee, Glen Shikuma, had operated a private sign-making business from the warehouse. The report also found that "on more than one occasion alcoholic beverages have been consumed" by employees at the warehouse, and that a "''year-end get-together' when alcoholic beverages were being consumed" was held at the warehouse. The report indicated that Petitioners admitted to attending year-end parties at the warehouse, but denied knowledge of Shikuma's unauthorized business activities.

         Kawauchi held pre-termination hearings for both Petitioners. The complaint alleged that during the hearing, Nakamoto's union representative asked Kawauchi for copies of the County's policies that Nakamoto had allegedly violated, and Kawauchi replied that "she did not know what the policies were and that she would look them up and send them to" Nakamoto and her union representative.

         On January 9, 2012, Kawauchi sent Ayau a termination letter which "falsely accused" her of misconduct, including violating the County alcohol policy. Kawauchi sent Nakamoto a notice of termination, postmarked January 10, 2012. The notice accused Nakamoto of violating the County alcohol policy, conducting personal or other business unrelated to County business at the elections warehouse, dereliction of duties as the election program administrator, and storing confidential elections information unsecuredly.

         On January 12, 2012, two to three days after Kawauchi sent Petitioners their notices of termination, the Hawai'i Tribune Herald newspaper published an article entitled, "County elections workers fired, " detailing the termination of Petitioners and other County employees in connection with the alleged misconduct at the warehouse. The complaints recounted the following excerpts from the article:

The infractions dealt with "violations of county policy, " the Hamakua councilman [Yagong] said Wednesday.
The investigation started with Shikuma, who is accused of running a sign printing business out of the elections warehouse and also storing alcohol there.
One source said he's seen Shikuma storing alcohol bottles in the warehouse and also attending a year-end party, complete with alcohol, held in the parking lot.

         Petitioners asserted that Nakamoto received permission to hold end-of-year potlucks at the elections warehouse. They excerpted from, and attached to their complaint, written statements from former Hawai'i County Clerks Kenneth Goodenow and Casey Leigh. In his statement, Goodenow asserted that he had authorized the holding of a post-election potluck in 2010, and that he was not questioned by an investigator about the event or Petitioners' terminations. In her statement, Leigh stated that the post-election potluck was held only in the parking lot of the elections warehouse, that she did not object to the party, and that "the private investigator who looked into the allegations of wrongdoing against election staff members never contacted me, even though both the County Clerk and Council Chair Yagong were aware that I had been the Clerk during the period of the allegations against Ms. Nakamoto."

         Petitioners concluded that Kawauchi, Yagong, and CSII "leaked false and misleading information to the media concerning [Petitioners'] termination."

         Nakamoto grieved her dismissal, and on June 21, 2012, the County rescinded the dismissal and agreed to her reinstatement subject to a ten-day suspension. Ayau resumed her employment on September 4, 2012, and the County agreed to her transfer to the County of Kaua'i.[2]

         The complaints list five counts against all defendants: I) defamation per se; II) defamation per quod; III) false light; IV) negligent investigation; and V) negligent infliction of emotional distress (NIED).

         2. Circuit Court Proceedings

         a. The County, and Kawauchi and Yagong in Their Official Capacities

         The County[3] filed motions to dismiss both complaints, arguing that Petitioners' claims were barred by the WCL's exclusivity provision[4] because their claims arose through the course and scope of their employment. The County also argued that the claims against Kawauchi and Yagong in their official capacities "are merely duplicative of the claims against the County and must be dismissed." The circuit court granted the County's motions on all five of Petitioners' claims, agreeing with the County that the claims were barred by the WCL's exclusivity provision.

         b. Kawauchi and Yagong in Their Individual Capacities

         Kawauchi and Yagong, in their individual capacities, filed motions to dismiss Petitioners' complaints. In their opposition, Petitioners requested that the court convert the motions to dismiss into a motion for summary judgment. The circuit court granted that request, and provided that the parties could supplement their motion and opposition. The parties provided supplemental summary judgment briefing.

         In their motions, Kawauchi and Yagong argued that Petitioners' claims were barred by the WCL because their claims against Kawauchi and Yagong in their individual capacities were identical to those in their official capacities, and Petitioners failed to meet the Iddings v. Mee-Lee, 82 Hawai'i 1, 919 P.2d 263 (1996) pleading standard for willful and wanton conduct under HRS § 386-8.[5]

         Kawauchi and Yagong also argued that Petitioners failed to allege which statements made by Kawauchi and Yagong were false. They argued that Nakamoto's complaint acknowledges that Nakamoto "was relieved of her duties due to her violation of the County's zero tolerance alcohol policy." Kawauchi and Yagong argued that the results of CSII's investigation were undisputed facts. Kawauchi and Yagong included declarations explaining that they had relied on information contained in CSII's investigative reports in deciding to terminate Petitioners. They argued that CSII reported that Nakamoto admitted that she was present at an elections warehouse party, and that Elton Nakagawa stated that he witnessed Nakamoto drinking alcohol. The CSII reports attached as exhibits stated that CSII had interviewed Ayau, and that Ayau admitted that she had consumed alcoholic beverages at the elections warehouse. CSII's reports also included transcripts of employee interviews, including that of Nakamoto, in which she admitted that she was present at an elections warehouse gathering during which others had consumed alcohol, and that of Nakagawa, who stated that he saw Nakamoto drinking alcohol.

         Kawauchi and Yagong argued that it was an undisputed fact that they terminated Petitioners in order "to perform their official duties and enforce County policy, " and that the terminations were based solely upon "evidence they each observed and the findings and results contained in the CSII Investigative Reports." They argued that it was an undisputed fact that, "[n]otwithstanding these findings . . . without ever seeking (or gaining) the approval of either Kawauchi or Yagong, " the County agreed to reinstate Petitioners' employment.

         Petitioners argued in opposition that Kawauchi and Yagong made false statements concerning the basis of Nakamoto's and Ayau's terminations. They argued that they did not commit the underlying violations, as evidenced by the fact that their terminations were reversed. Petitioners argued that Kawauchi and Yagong acted against County instructions in terminating Petitioners. They quoted an excerpt from, and attached as an exhibit to their opposition, the deposition of the County's Director of Human Resources, Ronald Takahashi, who stated that, in approximately July or September of 2011, before Petitioners were terminated, he met with Kawauchi and Yagong regarding the results of CSII's investigation, and told them that there was not enough evidence from CSII's investigation to terminate Nakamoto.

         Petitioners also attached as an exhibit a letter from Nicholas Hermes, a County Human Resources Manager, to Kawauchi regarding Petitioners' grievances. Hermes stated that he was "tremendously disappointed" with the Office of the County Clerk's "inaction toward routine processing" of the grievances and that it was clear that the grievance delay was due to the Office of the County Clerk's "lack of assertiveness and suspected willful stalling." Petitioners also argued that, contrary to Kawauchi's and Yagong's assertion, it was a disputed fact that the results of CSII's investigation were accurate, contending that defendants intentionally chose not to interview certain witnesses, including Kevin Akiyama, owner of the elections warehouse, and former County Clerks Goodenow and Leigh.

         Kawauchi and Yagong argued in reply, inter alia, that because the County Clerk appoints its staff, the County Clerk was not under a duty to act based upon Takahashi's opinion. Kawauchi and Yagong argued further that Takahashi had admitted publicly that he had a conflict of interest regarding the investigation of Shikuma, and attached as support exhibits newspaper articles discussing that issue.

         The court filed an order granting Kawauchi's and Yagong's motion for summary judgment, finding that Petitioners had failed to present evidence that Kawauchi and Yagong had engaged in "willful and wanton" conduct that would put Petitioners' claims beyond the scope of the WCL's exclusivity provision. The court also found that Petitioners had not presented evidence of false or defamatory statements attributable to Yagong and Kawauchi.

         The circuit court subsequently sua sponte amended its order granting summary judgment in favor of Kawauchi and Yagong individually, stating that its original order "went beyond the limited scope of its intention and arguably contains findings which invade the province of a workers compensation hearings officer." The court held that while there was conflicting evidence regarding the manner in which the investigation into Petitioners' alleged misconduct was handled, there was an absence of evidence that Kawauchi and Yagong made false statements about Petitioners. The court concluded that, as such, Kawauchi and Yagong had demonstrated that Petitioners would be unable to carry their burden of proof at trial.

         c. CSII

         CSII filed a motion for summary judgment, arguing, inter alia, that "there are no defamatory statements attributable to CSII" in Petitioners' complaints, and that CSII did not owe a duty to Petitioners. CSII argued that there was no special relationship between Petitioners and CSII such that a duty would arise from their relationship. CSII also argued, even if it did owe a duty, that it did not breach a duty because CSII interviewed County employees designated by a County Human Resources manager as employees in the elections division, advised the employees that they were being interviewed in connection with activities at the warehouse, and obtained permission from the employees and their union representative to record the interviews.

         In their opposition, Petitioners argued that CSII owed a duty of reasonable care to Petitioners to conduct an impartial investigation, because, as public sector employees, Petitioners could only be terminated for just cause. They argued that a just cause termination requires a fair and objective investigation into the employee's alleged misconduct. Petitioners also argued that the owner of CSII, Kevin Antony, is a professional private detective licensed by the State of Hawai'i and, "[a]s such, CSII is held to a higher standard of care, and before releasing the information of its reports to its clients, should have considered the accuracy of the data collected due to the risk associated with releasing information that later proves to be unreliable."

         Petitioners argued that CSII's investigation was negligent because CSII offered a narrow selection of negative evidence procured through a biased process, while suppressing broad categories of favorable and exculpatory evidence. Petitioners argued that CSII failed to properly interview or, in some cases, interview at all, critical witnesses, including former County clerks, Goodenow and Leigh.

         The circuit court filed an order granting CSII's motion for summary judgment. As to the defamation and false light claims, it found that Petitioners "failed to present any admissible evidence to demonstrate that any defamatory statement was published by CSII that was unprivileged and concerned [Petitioners]." As to the negligent investigation claim, the court held that CSII owed no duty to Petitioners.

         On October 3, 2013, the circuit court entered Judgment in favor of all defendants.

         B. ICA Proceedings

         Petitioners appealed, challenging the circuit court's holdings as to their defamation, false light, and negligent investigation claims. Regarding their defamation and false light claims, Petitioners argued that their claims were "not a ''personal injury' as defined by HRS [§] 386-3, "[6] asserting that the majority of jurisdictions recognize that defamation does not fall within workers' compensation exclusivity. Petitioners also contended that their injuries resulting from the alleged post-termination defamation did not arise out of their employment, and thus were not covered by the WCL's exclusivity provision.

         As to their negligent investigation claim, Petitioners argued that CSII was negligent in its investigation, having "failed or ignored to interview or properly interview critical witnesses." Petitioners asserted that CSII "owed a duty of reasonable care to [Petitioners] to conduct an impartial investigation, " and that its failure to do so constituted a "reckless disregard" that caused their injuries.

         The ICA affirmed the circuit court's judgment. Regarding Petitioners' defamation and false light claims, the ICA agreed with the circuit court's conclusion that such claims are generally within the WCL's exclusivity provision. The ICA relied on its decision in Yang v. Abercrombie & Fitch Stores, 128 Hawai'i 173, 284 P.3d 946(App. 2012), which held that intentional tort claims, including defamation, were barred by the WCL. However, the ICA determined that any defamatory statement made after Petitioners' termination would not be barred by the WCL, as the statements would not meet "an essential prerequisite for coverage under the WCL--the existence of an employer-employee relationship." Accordingly, the ICA concluded that the circuit court erred in ruling that the WCL bars Petitioners' defamation and false light claims to the extent those claims are based on statements made after the termination of their employment.

         As to the grant of summary judgment in favor of Kawauchi and Yagong, the ICA found that there was no genuine issue of material fact as to the claims against Kawauchi and Yagong. The ICA noted that "truth is an absolute defense" to defamation claims, and that a false light claim arising from the same statement as a defamation claim must be dismissed if the defamation claim is dismissed. The ICA determined that Kawauchi and Yagong had submitted undisputed evidence demonstrating that the allegedly defamatory statements published in the January 12, 2012 Hawai'i Tribune Herald article were true. Accordingly, the ICA concluded that the circuit court properly granted summary judgment in favor of Kawauchi and Yagong as individuals.

         Having held that the circuit court properly granted summary judgment in favor of Kawauchi and Yagong as individuals, the ICA determined that the law of the case doctrine barred Petitioners from reasserting their claims against the County and against Kawauchi and Yagong in their official capacity. The ICA explained that Petitioners asserted identical allegations against Kawauchi and Yagong whether in their individual or official capacities, and that the claims against the County were for respondeat superior liability related to Kawauchi's and Yagong's alleged conduct. Accordingly, although the post-termination claims were not barred by the WCL exclusivity provision, further litigation was precluded because Kawauchi's and Yagong's statements were true.

         Regarding the circuit court's grant of summary judgment in favor of CSII, the ICA found that CSII owed no duty to Petitioners. The ICA reasoned that "[Petitioners] did not submit any evidence to suggest that CSII realized or should have realized that its investigation posed an unreasonable risk of harm to [Petitioners] through the negligent or reckless conduct of Kawauchi, Yagong, or any other third ...


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