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Grimes v. Kinney Shoe Corp (5/2/97), 938 P 2d 997
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NOTICE: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to bring
errors to the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, phone (907) 264-0607, fax (907)
264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
ERIK GRIMES, )
) Supreme Court No. S-7494
Plaintiff, )
) United States District Court
v. ) No. A94-016 (JKS)
)
KINNEY SHOE CORPORATION, ) O P I N I O N
)
Defendant. ) [No. 4815 - May 2, 1997]
______________________________)
Certified Question from the United States
District Court for the District of Alaska,
James K. Singleton, Judge.
Appearances: John E. Casperson, Faulkner,
Banfield, Doogan & Holmes, Seattle,
Washington, for Plaintiff. Scott J.
Nordstrand, Owens & Turner, Anchorage, for
Defendant.
Before: Compton, Chief Justice, Rabinowitz,
Matthews, Eastaugh, and Fabe, Justices.
RABINOWITZ, Justice.
I. INTRODUCTION
This certification referral requires us to determine
whether the Alaska Wage and Hour Act (AWHA), prior to its amendment
in August 1995, permitted an award of attorney's fees and costs to
a prevailing employer. We hold that it does not.
II. FACTS AND PROCEEDINGS
From June 18, 1989, until May 4, 1991, Grimes was
employed as a manager of Kinney Shoe Corporation's Footlocker store
in the Sears Mall in Anchorage, Alaska. Grimes subsequently sued
under the AWHA to receive overtime wages allegedly owed but not
paid. The suit was tried in the United States District Court for
the District of Alaska, based on that court's diversity
jurisdiction. 28 U.S.C. sec. 1332. After trial Grimes' action was
dismissed with prejudice in October 1995. The United States
District Court's order of dismissal provided that "[t]he Company
may recover its costs and attorney's fees."
In response to Grimes' motion for reconsideration, the
United States District Court entered a Certification Order which
reads in part:
Alaska Statute 23.10.110(c) specifically
addresses the right of a prevailing plaintiff,
but is silent regarding prevailing defendants.
This statute has been amended to address this
issue in part, but a significant number of
cases are pending which will not be covered by
the amended statute. Defendant therefore
relies upon Alaska R. Civ. Proc. 82.
Plaintiff argues that an award of fees against
a plaintiff would violate Alaska public
policy. There is no Alaska Supreme Court case
on point, the analogous federal cases are
distinguishable because there is no rule in
federal practice similar to Rule 82, and the
parties indicate that the state superior court
judges that have considered the issue have
reached conflicting decisions.
(Footnotes omitted.) The United States District Court, acting
pursuant to Appellate Rule 407, then certified the following
question to this court:
May a defendant who prevails in an action
brought by an employee to recover wages and
penalties under AS 23.10.110 recover a partial
attorney fee under Alaska R. Civ. Proc. 82 and
its costs of action?
(Footnote omitted.) This court subsequently entered an order
agreeing to answer the certified question.
III. DISCUSSION
A. May a Defendant in an Action to Recover Wages under the
AWHA Be Awarded Attorney's Fees and Costs Pursuant to
Civil Rule 82 and Costs Pursuant to Civil Rule 79?
The AWHA provides that a prevailing plaintiff shall be
awarded reasonable attorney's fees and costs. The version of AS
23.10.110(c) applicable to the wage claims asserted by Grimes
provided:
The court in an action brought under this
section shall, in addition to a judgment
awarded to the plaintiff, allow costs of the
action and reasonable attorney fees to be paid
by the defendant. The attorney fees in the
case of actions brought under this section by
the commissioner shall be remitted by the
commissioner to the Department of Revenue.
The commissioner may not be required to pay
the filing fee or other costs. The
commissioner in case of suit has power to join
various claimants against the same employer in
one cause of action.
Until recently there was no provision in the AWHA authorizing
awards of attorney's fees or costs to prevailing defendants. (EN1)
Kinney argues that given the absence of statutory
authority to the contrary, Civil Rule 82 allows an award of partial
attorney's fees. (EN2) Grimes claims that Civil Rule 82 does not
apply to prevailing defendants under the AWHA (i.e. AS 23.10.110(c)
prior to its amendment in 1995).
One of Grimes' central arguments is that imposing the
burden of Civil Rule 82 attorney's fees on nonprevailing plaintiffs
would "create a þchilling effectþ on wage and hour claims and would
frustrate the policy behind the AWHA by discouraging claimants from
vindicating their rights." Grimes relies on our holding in Whaley
v. Alaska Workers' Compensation Board, 648 P.2d 955 (Alaska 1982),
to support this contention. At issue in Whaley was the
applicability of Appellate Rule 508(e), governing fees in appeals
involving the Alaska Workers' Compensation Act (AWCA). We
concluded that in this context an attorney's fee award against an
employee was improper absent a showing that the appeal was
"frivolous, unreasonable, or brought in bad faith." Id. at 960.
In so holding, we reasoned in part as follows:
To permit an appellate court to grant
attorneys' fees to prevailing party-defendants
without consideration of the underlying
purpose of the Alaska Workers' Compensation
Act, would severely undermine the
effectiveness of the statute. The statute is
designed to provide the most efficient,
dignified, and certain means of determining
benefits for workers sustaining work-connected
injuries, and is to be liberally construed in
favor of the employee . . . [a] routine grant
of attorneys' fees to employer-defendants
would undermine the purposes of the statute
and severely limit a claimant's ability to
seek appellate relief.
Id. at 959 (citation omitted).
Grimes argues that the reasoning of the Whaley court is
"equally applicable"to the issue of Civil Rule 82 fees in the AWHA
context. He notes that the policy underlying the AWHA is
"strikingly similar"to that of the AWCA, (EN3) and asserts that
allowing attorney's fees awards for AWHA prevailing defendants
would similarly discourage employees from bringing meritorious
claims, thus "undermin[ing] the purposes of the statute."
Kinney responds that Grimes's reliance on Whaley is
misplaced, since the award of attorney's fees contemplated in that
case was governed by Appellate Rule 508(e), which provides that
attorney's fees may be allowed "in an amount to be determined by
the court." Kinney argues that since the appellate rules "do not
mandate an award of partial attorney's fees to the prevailing
party, as does Civil Rule 82[,] Whaley has no application to the
present case." (Footnote omitted.)
We view the fact that Appellate Rule 508(e) makes an
award of attorney's fees discretionary and that Civil Rule 82
mandates an award of attorney's fees to the prevailing party as
supporting Grimes' position. The fact that under Civil Rule 82
attorney's fees are presumptively awarded to the prevailing party
indicates that the policy concerns expressed in Whaley are even
more compelling in the AWHA context. In Whaley we viewed "a
routine grant of attorneys' fees to employer-defendants"as
possibly subverting the rationale behind the AWCA, even though
Appellate Rule 508(e) allows a court to decline to make such an
award. Civil Rule 82, phrased "shall"as opposed to "may,"does
not give courts this discretion. Thus the "routine grant"scenario
to which we alluded in Whaley, and on which we based our holding in
part, is more certain to result in the AWHA context. (EN4)
In addition to reasoning by analogy, Grimes asserts that
the AWHA reflects a comprehensive statutory scheme that plainly
allows only plaintiffs to recover their costs and attorney's fees.
Grimes persuasively argues that since the plain language of AS
23.10.110(c) covers "all aspects of employees' rights and their
enforcement,"including "costs of the action and reasonable
attorney fees to be paid by the defendant,"its omission of any
reference to an attorney's fee award to prevailing defendants is
telling.
Grimes notes that this distinction made in AS
23.10.110(c) between attorney's fees awards for prevailing
employees and prevailing employers was sustained against a
constitutional attack in Bobich v. Stewart, 843 P.2d 1232, 1238 n.9
(Alaska 1992). There this court said:
Bobich argues that because AS 23.10.110(c)
awards attorney's fees to the plaintiff, but
not the defendant, and because, allegedly,
this rule lacks a rational basis, the
provision thus violates the U.S.
Constitution's Equal Protection Clause. See
U.S. Const. amend XIV. This logic is faulty.
The objective of AS 23.10.110, as Bobich
himself understands it, is to encourage
employees to press wage-and-hour claims.
Essentially, Bobich's argument is not that the
provision for attorney's fees is in itself an
irrational means of achieving that goal, but
that other provisions in the statute also
achieve that goal. This position, however, is
not sustainable as an argument against the
law's reasonableness. The effectiveness of
other statutory provisions in achieving an
objective does not render one particular
provision irrational.
Grimes buttresses his arguments by reference to
legislative intent as indicated by recent amendments to the AWHA.
(EN5) AS 23.10.110(e) and (g). (EN6)
The amendment provides for fees and costs to a
prevailing defendant only in the event of a
frivolous or bad faith claim. This amendment
authorizes, for the first time, an award of
fees and costs against a plaintiff in a wage
and hour case. As noted by the legislative
sponsors and the Attorney General, fees and
costs were not recoverable under Alaska law
before the amendment.[ (EN7)]
(Footnote omitted.)
Kinney contends that although
the AWHA provides a prevailing plaintiff with
enhanced rights with respect to recovery of
attorney's fees, as compared to Civil Rule 82
. . . there is nothing in former AS
23.10.110(c) which either expressly or
impliedly prohibited a partial fee award to a
prevailing defendant under Civil Rule 82.
Reading Civil Rule 82 and the AWHA, so as to
give effect to both, compels the conclusion
that Civil Rule 82 attorneys fees are
available to a prevailing defendant in an AWHA
claim under former AS 23.10.110.
With respect to Grimes' assertion that allowing
prevailing employers to recover attorney's fees under Civil Rule 82
would somehow frustrate the policy embodied in the AWHA, Kinney
argues that prevailing plaintiffs "still benefit from the express
provisions of the AWHA which allow them to recover reasonable
actual fees. Defendants recover only partial fees if they
prevail." The essence of Kinney's argument is that "[a]llowing
prevailing defendants to recover attorney's fees under the AWHA, in
accordance with Civil Rule 82, allows balanced fulfillment of the
purposes served by both the AWHA and Civil Rule 82."(EN8) On the
other hand, in the circumstance where a comprehensive statute
specifically provides that prevailing wage claimants are to be
awarded reasonable attorney's fees and costs but lacks a parallel
provision providing for prevailing defendants to be awarded
attorney's fees and costs, the notion of balanced fulfillment of
the purposes served by both the AWHA and Civil Rule 82 is
inapposite.
It is the function of this court to interpret AS
23.10.110(c) - not to balance the statute and Civil Rule 82. Based
on analogous case law and the plain language of AS 23.10.110(c), we
hold that a prevailing defendant in an AWHA action to recover wages
is not entitled to an award of attorney's fees and costs under
former AS 23.10.110(c), nor is a prevailing defendant entitled to
an award of attorney's fees under Civil Rule 82.
B. Does the Fact that Grimes' Suit Was Brought in the United
States District Court Pursuant to Its Diversity
Jurisdiction Mandate that Costs May Be Assessed against
a Losing Plaintiff by the Federal Court?
Based on 28 U.S.C. sec. 1920 (EN9) and Federal Rule of
Civil Procedure 54, (EN10) Kinney argues that costs may be assessed
against a losing plaintiff in an AWHA action brought in federal
district court pursuant to its diversity jurisdiction. The federal
district court certified the question of costs as well as
attorney's fees to this court. Since we have construed former AS
23.10.110(c) as allowing an award of attorney's fees and costs to
prevailing plaintiffs only, the remaining question is whether a
federal district court can nonetheless award costs to a prevailing
AWHA defendant pursuant to applicable federal law. We conclude
that the AWHA, rather than the federal statue and rule, governs the
award of costs.
In Bright v. Land O'Lakes, Inc., 844 F.2d 436 (7th Cir.
1988), the Seventh Circuit held that a Wisconsin statute
authorizing fee shifting of actual costs to prevailing plaintiffs
is not preempted by federal law limiting the amount of allowable
expert witness fees. The court acknowledged that the general rule
allows applicable federal law to set a limit on recoverable fees
but held that, where a state statute expressly authorizes a full
shift of fees, state law governs actions brought in federal court.
In Freeman v. Package Machinery Co., 865 F.2d 1331 (1st
Cir. 1988), the First Circuit similarly held that a Massachusetts
statute allowing for cost-shifting in employment discrimination
suits applies to an action in federal court, despite federal law to
the contrary. The Freeman court stated that "the cost-shifting
envisioned by [the state law] constitutes part of the substantive
remedy created by state law, and applies when a federal court,
having obtained jurisdiction, proceeds to hear and determine the
state-law claim." Id. at 1348. The court continued:
The statutory wording itself, the discretion
invested by state statutes which are in pari
passu with the cost-shifting provision, and
the judicial gloss placed upon the language
. . . combine to import into the substantive
state-law remedy an element of flexibility,
both as to entitlement and amount . . . . A
federal court empowered to determine a state-
law claim (whether by reason of diversity,
pendent jurisdiction, or otherwise) must be
accorded [the] same degree of flexibility
[accorded to state courts hearing the same
claim].
Id. (citations omitted).
The Freeman court rejected the applicability of precedent
which holds that in a routine diversity case, federal law governs
the taxation of costs in federal district court. Bosse v. Litton
United Handling Sys., 646 F.2d 689 (1st Cir. 1981). See Conte v.
Flota Mercante Del Estado, 277 F.2d 664 (2d Cir. 1960); Erving
Paper Mills v. Hudson-Sharp Mach. Co., 271 F. Supp. 1017 (D. Wisc.
1967). The court noted that "[t]hese cases are inapposite where,
as here, the prevailing party's entitlement is not dependent upon
a state procedural provision of general applicability, but rather
is an integral part of the substantive state-law remedy for a
particular wrong." Id. See also Smith v. Frazzini, 139 F.R.D. 677
(D. Colo. 1991) (state statutes regarding award of costs or
attorney's fees to successful litigants control in diversity cases;
federal provisions relating to costs and attorney's fee awards
control in federal question cases).
IV. CONCLUSION
A defendant who prevails in an action brought by an
employee to recover wages and penalties pursuant to Alaska's AWHA
may not, under either former AS 23.10.110(c) or Civil Rule 82,
recover costs or attorney's fees.
ENDNOTES:
1. The 1995 amendments to AS 23.10.110 became effective on August
22, 1995. Subsections (d)-(h), which govern disposition of the
attorney's fees issue, apply to "wages earned for hours worked on
or after the effective date"of the Act. CSHB 115 sec. 4(c).
Thus, in order for former AS 23.10.110(c) to apply, the employee's
claims must relate to work performed before August 22, 1995.
Grimes' lawsuit was based on hours he allegedly worked while
managing Kinney's Footlocker store from June 18, 1989, until May 4,
1991. Therefore, as Kinney rightly concedes, the former statute is
applicable.
2. Civil Rule 82 provides in part:
(a) Allowance to Prevailing Party. Except as
otherwise provided by law or agreed to by the
parties, the prevailing party in a civil case
shall be awarded attorney's fees calculated
under this rule.
Civil Rule 79 provides for the taxation of certain litigation costs
in favor of "a party entitled to costs." The prevailing party
standard of Civil rule 82 is used to determine the party entitled
to costs. See Davis v. Hallett, 587 P.2d 1170 (Alaska 1978). Both
parties assume that Civil Rule 79 and Civil Rule 82 interact with
AS 23.10.110(c) in the same manner -- although they disagree as to
what that interaction is -- and focus on Civil Rule 82. Agreeing
with their assumption, we adopt the same focus.
3. The AWHA states that it is the policy of the statute to
"safeguard existing minimum wage and overtime compensation
standards that are adequate to maintain the health, efficiency and
general well-being of workers against the unfair competition of
wage and hour standards that do not provide adequate standards of
living." AS 23.10.050(2).
4. Civil Rule 82 accords trial courts broad discretion to award
attorney's fees. Such awards are reviewable only for an abuse of
discretion. Kenai Lumber Co. v. LeResche, 646 P.2d 215, 222
(Alaska 1982).
5. As noted above, these amendments were effective August 22,
1995, and do not apply to work performed before this date.
6. Grimes further states:
The obvious legislative intent, acknowledged
in Bobich, is to provide the employee who
brings a wage and hour claim a further
incentive to pursue it. Allowing the
successful employer to recover fees and costs
would obviously defeat this policy.
He also notes that the Sixth Circuit considering a
comparable provision of the Fair Labor Standards Act in Fegley v.
Higgins, 19 F.3d 1126 (6th Cir. 1994), cert. denied, ___ U.S. ___,
115 S. Ct. 203 (1994), concluded that defendants were not entitled
to attorney's fees under the statute. However, as Kinney suggests,
since the federal courts have no Alaska Civil Rule 82 equivalent,
Fegley and other federal decisions shed little light on the issues
raised here.
Any contention that Civil Rule 82 is preempted because federal
law does not allow for awards of attorney's fees in wage and hour
cases is similarly misplaced. See Webster v. Bechtel, Inc., 621
P.2d 890, 900 (Alaska 1980) (holding that the Fair Labor Standards
Act does not preempt the AWHA).
7. Grimes's argument references an opinion letter from the
Attorney General and the Sponsor Statement for HB 115. Kinney
notes in response:
While attorney general opinions are entitled
to some deference in matters of statutory
construction, they are not always correct.
And this Court exercises independent judgment
in matters of statutory and court rule
interpretation. The Attorney General's
opinion regarding the AWHA is just that, an
opinion. And the commentary of the
legislative sponsor of the amendments to AWHA
is even less probative.
(Footnotes omitted.)
While Kinney is correct that this court exercises its
independent judgment on matters of statutory interpretation, Kinney
rightly concedes that this court may properly consider the opinions
of both the AWHA's legislative sponsor and the Attorney General for
guidance. In this context the weight accorded these opinions is
largely in this court's discretion. See Torkko/Korman/Engineers v.
Penland Ventures, 673 P.2d 769 (Alaska 1983); Hafling v.
Inlandboatmen's Union of the Pacific, 585 P.2d 870 (Alaska 1978)
(the legislature is presumed to be indicating a substantive change
in the law when it amends a statute).
8. Kinney further notes that Civil Rule 82 applies in many
contexts where a claim is brought to vindicate the rights of
workers. See Van Huff v. Sohio Alaska Petroleum Co., 835 P.2d
1181, 1189 (Alaska 1992) (Civil Rule 82 applies to prevailing
employer in wrongful discharge action); Alaska State Fed'n of Labor
v. State, Dep't of Labor, 713 P.2d 1208, 1212 (Alaska 1986) (Civil
Rule 82 applies to claims seeking application of prevailing wage
act).
9. Section 1920 provides:
Taxation of costs. A judge or clerk of any
court of the United States may tax as costs
the following:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any
part of the stenographic transcript
necessarily obtained for use in the case;
(3) Fees and disbursements for printing and
witnesses;
(4) Fees for exemplification and copies of
papers necessarily obtained for use in the
case;
(5) Docket fees under section 1923 of this
title;
(6) Compensation of court appointed experts,
compensation of interpreters, and salaries,
fees, expenses, and costs of special
interpretation services under section 1828 of
this title.
A bill of costs shall be filed in the
case and, upon allowance, included in the
judgment or decree.
10. Federal Rule of Civil Procedure 54(d) indicates that generally
costs shall be allowed as a matter of course to the prevailing
party.
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