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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. De Salvo v. Bryant (2/15/2002) sp-5536

De Salvo v. Bryant (2/15/2002) sp-5536

     Notice:   This opinion is subject to 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) 264-0608, fax (907) 264-0878.



            THE SUPREME COURT OF THE STATE OF ALASKA


LYNELLE DeSALVO, RICHARD      )
McCREADIE, STUART MORLANG     )
through his mother and sole heir, LOIS  )
MORLANG, JOSEPH D. WEISE, and )
RUBY L. WHITE,                               )
                              )    Supreme Court No. S-9827
             Appellants,           )
                              )    Superior Court No.
     v.                       )    4FA-97-1285 CI
                              )
THOMAS K. BRYANT, WILLIAM     )
R. LYTLE, and MASCOT MINING,  )
INC.,                                                  )    O P I
                              N I O N
                              )
             Appellees.                 )    [No. 5536 - February
                              15, 2002]
________________________________)


          Appeal  from the Superior Court of the  State
          of    Alaska,   Fourth   Judicial   District,
          Fairbanks, Niesje J. Steinkruger, Judge.

          Appearances:  John E. Havelock,  Law  Offices
          of   John   E.   Havelock,   Anchorage,   for
          Appellants.  Charles E. Cole, Law  Office  of
          Charles E. Cole, Fairbanks, for Appellees.

          Before:     Fabe,  Chief  Justice,  Matthews,
          Eastaugh, Bryner, and Carpeneti, Justices.

          CARPENETI, Justice.

I.   INTRODUCTION

          I.   In 1996 five people began working at a mining operation

near  the  Dalton Highway.  Irregularly paid, they filed  suit  a

year   later  against  three  people  involved  with  the  mining

operation, one or more of whom may have been their employer.  Two

years  after that, in 1999, without telling their attorney,  they

privately   entered   into   settlement  agreements   purportedly

releasing all involved from further liability stemming from their

employment.   When  he  learned what his clients  had  done,  the

employees'  attorney  moved  for  dismissal  of  the  case   with

prejudice  and  asked for attorney's fees in the amount  of  one-

third  of  the recovery (the fees apparently to be  paid  by  the

defendants).   The trial court dismissed the case with  prejudice

but denied the application for fees.

          Because  the Alaska Wage and Hour Act may be implicated

by  some  of the plaintiffs' claims, private settlement of  those

issues  could be precluded by statute.  Furthermore, the superior

court  must  determine  whether an award of  attorney's  fees  is

appropriate.  We therefore remand the case to the superior  court

to determine whether the plaintiffs and defendants fall under the

Wage and Hour Act and to determine if an award of attorney's fees

to the employees is proper.

II.  FACTS AND PROCEEDINGS

          Around  May  of 1996, Lynelle DeSalvo, Ruby  L.  White,

Richard   McCreadie,  Stuart  Morland,  and  Joseph  Weise   (the

employees)  were hired to work on mining claims  in  the  Chatman

Creek area of the Dalton Highway for the 1996 mining season under

the  authority of Thomas Bryant.  At or around the time of  hire,

the  employees  entered into wage agreements with Thomas  Bryant,

William Lytle, or Mascot Mining (Mascot), the terms of which  are

disputed.  The employees, entitled to pay at least once  a  month

pursuant to AS 23.05.140, were not regularly paid.

          On   June  12,  1997,  the  employees,  represented  by

Attorney  John E. Havelock, filed suit in superior court alleging

violations  of  AS  23.10.015 (false representations  to  procure

employment),  AS  23.05.140(b)-(d) (failure to timely  pay  wages

due),  AS 23.10.060 (failure to render payment for overtime under

the  Alaska Wage and Hour Act), and fraud.  Each plaintiff had  a

claim for false representations, failure to timely pay wages due,

and  fraud.  McCreadie, Morlang, and Weise, in addition,  claimed

overtime  pay  and damages in an amount equal to  the  amount  of

unpaid overtime.

             Bryant  and  Mascot Mining, represented by  Attorney

Charles   E.  Cole,  filed  answers  in  October  and   December,

respectively, of 1997.  The next spring, plaintiffs  filed  proof

of  service  by  publication for Lytle.  In June and  July  1999,

without  notifying  Havelock,  the  employees  signed  settlement

agreements  releasing  Lytle "and all his  associates"  from  any

claims   arising  from  their  employment  at  the   mine.    The

settlements were entered without the benefit of counsel on either

side.

          In  February 2000 the superior court granted Bryant and

Mascot's  motion for leave to amend their respective  answers  to

assert  the  defense of settlement and compromise.  In  May  2000

John Havelock, the employees' attorney, discovered the employees'

settlement  when  Charles Cole, counsel for  Bryant  and  Mascot,

furnished  copies  of checks and documents indicating  that  each

plaintiff  had been paid an amount in settlement of their  claims

that satisfied each individual.

          Each employee apparently received an amount equal to or

approximating  his or her claim for net back  wages.   Unable  to

contact  his clients, Havelock filed a motion to dismiss  with  a

grant  of  plaintiffs' attorney's fees.  He  established  in  his

supporting affidavit that he had entered into a costs  plus  one-

third  contingent  fee arrangement with each  of  the  employees.

Havelock  concluded  his affidavit by stating  that  because  the

total amount of money paid to the employees was $34,189, he would

be  entitled  to  $11,396  under the  one-third  contingency  fee

agreement.1

          On July 14, 2000, Cole filed an opposition on behalf of

"Defendants,  and each of them," apparently causing  Havelock  to

assume  that Cole represented the missing defendant,  Lytle,  who

had   never   answered  the  complaint  after  being  served   by

          publication.  On July 21, 2000, an order granting plaintiffs'

motion  to  dismiss  with  prejudice and  denying  the  award  of

attorney's fees was entered by the superior court.

          On  July  24, 2000, not having received notice  of  the

dismissal,  Havelock filed a reply to Cole's  opposition  to  his

motion, attaching as exhibits the forms signed by each individual

employee or employee's representative.  Each release set out  the

amount of money received in these words (spelling and punctuation

as in originals):

          On This ____ day of June 1999 I have received
          the  summer  of __________ Dollars  from  Mr.
          Willam  Lytel  for Worked Performed  for  Mr.
          Lytel In the summer of 1996 In Alaska At  his
          mining operation.  With my sigutuner on  this
          document  I  relice  Mr.Lytel  and  all   his
          associates of all obligations to me in regard
          to this mater.
          
Though  he  sought  and  was given leave to  file  a  motion  for

reconsideration,  Havelock  instead appealed  the  dismissal  and

denial of fees to this court.

III. STANDARD OF REVIEW

          We  review  a  trial court's decision to  dismiss  with

prejudice under an abuse of discretion standard.2   An  abuse  of

discretion  is found only "when we are left with a  definite  and

firm conviction, after reviewing the whole record, that the trial

court erred in its ruling."3

IV.  DISCUSSION

          A.    The Superior Court Should Have Considered Whether

          the  Employees' Claims Could Be Privately Settled under

          the Alaska Wage and Hour Act.

          Generally,  "  `[s]ound judicial policy indicates  that

private settlements and stipulations between the parties  are  to

be  favored  and should not be lightly set aside.'  "4   In  such

cases, an action may be voluntarily dismissed by the plaintiff by

filing  a  stipulation  of  dismissal by  all  parties  who  have

appeared in the action.5  Or, a court may dismiss an action  upon

the  plaintiff's motion where there are such terms and conditions

          as the court deems proper.6

          In  certain  instances,  though,  the  legislature  has

indicated that private settlements are disfavored; in such cases,

the  legislature has required court supervision.  Overtime claims

under  the  Alaska  Wage  and  Hour Act  (AWHA)  fall  into  this

category.  AWHA  was  enacted  to  establish  new  and  safeguard

existing  minimum  and  overtime wage standards  for  workers  to

promote their health, efficiency, and general well-being.7

          The  employees'  causes  of  action  for  fraud,  false

representations  of employment, and failure to timely  pay  wages

due  do not fall under AWHA.  These actions, therefore, could  be

privately settled for any amount, or for nothing.

          McCreadie, Morlang, and Weise, though, pled a cause  of

action  under AS 23.10.060, for failure to pay overtime.   Alaska

Statute 23.10.060 is part of AWHA.  A settlement of such a  claim

requires  the approval of the court or the Alaska  Department  of

Labor.8   If  such  approval  is not  obtained,  an  employee  is

entitled  to  liquidated  damages unless the  employee  expressly

waives  the right to receive liquidated damages.9  Such a private

written  settlement is subject to the review of  the  department,

which  may  approve  it if it is fair to the parties  involved.10

Settlement agreements entered into after August 21, 1995 that are

not  approved  by  the  court  or the  department  are  expressly

rendered unenforceable.11  In privately settling claims under this

section, therefore, parties are required to follow the procedures

set out in AS 23.10.110(a) and (j).

          The  trial  court's  failure to determine  whether  the

settlement  and release entered into by McCreadie,  Morlang,  and

Weise  implicated AWHA is understandable.  The employees did  not

make  clear that they were pursuing a cause of action under  AWHA

or  what  the  court's responsibility was  under  the  act.   The

complaint contained only a single reference to "AS 23.10.060"  in

a heading, but that reference was without any discussion, and the

complaint made no reference to the procedures AWHA mandates.  And

          the single statute mentioned, AS 23.10.060, itself contains no

reference   to   the  provisions  of  AWHA  that  require   court

involvement in approving settlements.12

          In  sum,  DeSalvo and White may privately settle  their

claims because the claims fall outside AWHA, but as to McCreadie,

Morlang, and Weise, the trial court must make factual findings as

to  whether AWHA applies to their claims.  This includes findings

as  to  whether  Lytle is a defendant in the  case  against  whom

judgment  can be entered,13 whether the defendants were employers

under  AWHA,14 and whether the plaintiffs fall under one  of  the

exceptions  to  AWHA.15   If AWHA does apply, the superior  court

must review the statutory causes of action.16

     B.   If  AWHA  Does  Not  Apply, the Superior  Court  Should

          Consider  Whether  the  Catalyst  Theory  Supports   an

          Imposition of Attorney's Fees under Rule 82.

          Regardless  of  AWHA's application  to  the  employees'

claims,  we  conclude that the courts should not  participate  in

denying  Havelock compensation as the result of the  questionable

conduct  of  Lytle, Bryant, or Mascot in settling the  employees'

claims behind counsel's back.

          Under  Rule  82(a), prevailing parties in a civil  case

shall be awarded attorney's fees.17  Even without formal judicial

relief,  many  plaintiffs achieve the goals of their  litigation.

And,  "defendants, on the whole, are usually rather reluctant  to

concede  that the litigation prompted them to mend their ways."18

To compensate for this reluctance, federal courts have previously

adopted  a "catalyst" approach to awards of attorney's  fees  for

cases  brought under federal fee-shifting statutes,  such  as  42

U.S.C.   1988  and  other  statutes that provide  for  attorney's

fees.19   Although the United States Supreme Court  has  recently

disavowed use of the catalyst theory in suits under federal  fee-

shifting statutes,20 the rationale behind this theory may apply to

the  facts  of this case. As this approach allows for  awards  of

attorney's fees in instances where a plaintiff prevails when  his

          or her lawsuit brings about the relief requested in a manner

other  than  a  formal  judgment,  we  believe  that  it  may  be

appropriately used under the circumstances of this case.21

          To determine if a plaintiff who settles is a prevailing

party  under  Rule 82, using the catalyst approach the  plaintiff

must  "show  both a causal connection between the filing  of  the

suit and the defendant's actions and that the defendant's conduct

was required by law, i.e., not a wholly gratuitous response to an

action that in itself was frivolous or groundless."22

          This  two-part  test consists of both a factual  and  a

legal  inquiry.  The plaintiff must first show that the  goal  of

litigation has been achieved.  He or she need only succeed on any

significant  issue which achieves some of the benefit  sought  in

bringing the suit.23  The court must then determine if there is a

causal  connection  between  the  defendant's  action  generating

relief and the lawsuit.  This is established by evidence that the

plaintiff's  lawsuit  is  "a substantial  factor  or  significant

catalyst  in  motivating  the defendants  to  [settle]."24   This

intensely factual test emphasizes the chronology of events as  an

important element in determining causation.25

          Once a plaintiff has shown that his or her lawsuit  was

a  catalyst  in  causing the defendant to act, the plaintiff  has

made  a  prima facie case that he or she is the prevailing  party

and is entitled to attorney's fees.  The plaintiff need not prove

that the defendant's conduct is required by law or otherwise show

the  defendant's motivation.  Rather, it is only if the defendant

can  demonstrate  that the plaintiff's lawsuit  lacked  colorable

merit  or that the defendant's action was wholly gratuitous  that

the plaintiff is not entitled to recover attorney's fees.26

          When a plaintiff prevails under the catalyst theory  by

settling  the  case and achieving the goal of  the  lawsuit,  the

court  should  award attorney's fees under Rule  82(b)(2).27   In

cases that require more of an award than is permitted under  Rule

82(b)(2),  the court can vary an award according to  the  factors

          listed in Rule 82(b)(3).

                On  remand,  the  superior court should  consider

whether  McCreadie, Morlang, and Weise's claims  implicate  AWHA.

If  they  do,  the court should award those employees  attorney's

fees  pursuant to AS 23.10.110(c).28  If McCreadie, Morlang,  and

Weise's  claims  do  not implicate AWHA and  they  are  therefore

entitled  to  privately settle their claims, the  superior  court

should  consider whether they are entitled to an  award  of  fees

under the catalyst theory.  Finally, because their claims do  not

come under AWHA, DeSalvo and White in any case are entitled to  a

determination  under  the catalyst theory  of  whether  they  are

entitled to an award of fees.

V.   CONCLUSION

          Because  the  superior court did not  consider  whether
AWHA  applied to the claims of McCreadie, Morlang, and Weise,  we
remand for determination of that issue.  If the statute is  found
to  apply to those employees, the superior court should apply  it
(including  determination  of  liquidated  damages)   and   award
attorney's  fees pursuant to AS 23.10.110(c).  If AWHA  does  not
apply,  the  superior  court should determine  whether  they  are
entitled  to attorney's fees under the guidelines established  in
this  opinion.  As to DeSalvo and White, the court must make  the
determination under the catalyst theory, as AWHA does  not  apply
to their claims.
_______________________________
     1     The  one-third  contingency fee agreement  called  for
attorney's  fees  to  be  paid  by each  plaintiff  out  of  each
plaintiff's recovery.  Havelock's motion, however, called for the
defendants to pay $11,396 directly to Havelock and in addition to
the settlement amounts already paid to plaintiffs.

     2     Arbelovsky v. Ebasco Servs., Inc., 922 P.2d  225,  227
(Alaska 1996) (citations omitted).

     3     Peter  Pan Seafoods, Inc. v. Stepanoff, 650 P.2d  375,
378-79 (Alaska 1982).

     4     Henash  v.  Ipalook, 985 P.2d 442, 450  (Alaska  1999)
(quoting  City  and  Borough of Sitka v.  Construction  and  Gen.
Laborers Local 942, 644 P.2d 227, 234 n.18 (Alaska 1982)).

     5    See Alaska R. Civ. P. 41(a)(1).

     6    See Alaska R. Civ. P. 41(a)(2).

     7    See AS 23.10.050.

     8    AS 23.10.110(j) states:

          In   a   settlement   for   unpaid   overtime
          compensation  that is not supervised  by  the
          department  or  the  court,  an  employee  is
          entitled to liquidated damages under  (a)  of
          this section unless the employee and employer
          enter into a written settlement agreement  in
          which the employee expressly waives the right
          to  receive  liquidated damages.   A  private
          written   settlement  agreement  under   this
          subsection  is not valid unless submitted  to
          the  department  for review.  The  department
          shall review the agreement and approve it  if
          it  is  fair  to the parties.  The department
          shall approve or deny an agreement within  30
          days  of  receipt.   A waiver  of  liquidated
          damages may not be a condition of employment.
          
See  also  McKeown  v. Kinney Shoe Corp., 820 P.2d  1068  (Alaska
1991)  ("Permitting  private  settlement  of  liquidated  damages
claims  under AWHA is contrary to the strong policy  behind  AWHA
and its liquidated damages provisions.").

     9    AS 23.10.110(a) states:

          An  employer who violates a provision  of  AS
          23.10.060  or  23.10.065  is  liable  to   an
          employee  affected in the  amount  of  unpaid
          minimum    wages,    or    unpaid    overtime
          compensation, as the case may be, and, except
          as  provided  in (d) of this section,  in  an
          additional amount as liquidated damages.
          
AS 23.10.110(d) states:

          In  an  action under (a) of this  section  to
          recover   unpaid  overtime  compensation   or
          liquidated  damages for unpaid  overtime,  if
          the  defendant shows by clear and  convincing
          evidence that the act or omission giving rise
          to the action was made in good faith and that
          the   employer  had  reasonable  grounds  for
          believing that the act or omission was not in
          violation  of  AS 23.10.060,  the  court  may
          decline  to award liquidated damages  or  may
          award  an  amount of liquidated damages  less
          than  the  amount  set out  in  (a)  of  this
          section.
          
     10    See AS 23.10.110(j).

     11     Alyeska Pipeline Serv. Co. v. Shook, 978 P.2d 86,  90
(Alaska 1999).

     12    See AS 23.10.110(a), (j).

     13      William  Lytle  was  one  of  the  three  defendants
originally  named  in  the  complaint.   In  September  1998  the
employees were served notice to show cause within 60 days why the
case  should  not be dismissed for failure to serve  Lytle.   The
employees  filed  proof of service by publication  for  Lytle  on
April  28,  1999.  Lytle never answered the complaint.   However,
when  Bryant and Mascot filed their preliminary witness  list  on
December  6,  1999, William Lytle was listed,  with  his  address
being in care of defense counsel Charles Cole.  Then, on July 14,
2000,  Cole  filed an opposition to Havelock's motion to  dismiss
with  an  award of attorney's fees on behalf of "Defendants,  and
each  of  them."   The  trial  court, therefore,  should  make  a
determination as to whether Lytle is a defendant who has properly
answered  the  complaint against him and is a  party  before  the
court  or  if  the  employees must resort to a  default  judgment
against him.

     14    Bryant denied that he and Mascot were the employers of
the  plaintiff employees.  Because the complaint did  not  allege
that Mascot was the employer, Mascot did not address the issue in
its  answer.  The employees, though, claim they were employed  by
Lytle  and Bryant acting in concert, utilizing Mascot to  achieve
their objectives.

     15     No determination was made by the superior court as to
whether  the  employees fell within AWHA.  Not all  employees  in
Alaska  are  subject  to  the  requirements  of  AWHA.   See   AS
23.10.055.  Specifically, individuals employed in the search  for
placer  or  hard rock minerals are exempt from the provisions  of
AWHA.  See AS 23.10.055(10).  McCreadie, Morlang, and Weise  were
hired  to  work  on  mining claims near Mile 161  of  the  Dalton
Highway  to move and operate mining equipment, clean up a  mining
site,  build roads, disassemble a mineral processing  plant,  and
clean  up  creeks,  thereby possibly falling  under  one  of  the
exceptions to AWHA.

     16     If  AWHA  does  apply, the trial  court  must  review
McCreadie,  Morlang, and Weise's claims for overtime compensation
under  AS  23.10.060 and AS 23.10.110(a).  Under AS 23.10.110(a),
the  employees  are entitled to their back overtime  pay  and  an
equal  amount in liquidated damages.  If Lytle, Bryant, or Mascot
allege  that  the employee's claims have been privately  settled,
the   settlement  must  be  reviewed  by  the  court   under   AS
23.10.110(j) to determine if it is fair to the parties.

     17    Alaska R. Civ. P. 82(a) states:

          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.
          
     18    Posada v. Lamb County, Texas, 716 F.2d 1066, 1072 (5th
Cir. 1983).

     19      See   State,  Dep't  of  Natural  Res.  v.   Tongass
Conservation Soc'y, 931 P.2d 1016, 1017 (Alaska 1997).  See  also
Hennigan  v.  Ouachita Parish Sch. Bd., 749 F.2d 1148  (5th  Cir.
1985); Envtl. Def. Fund, Inc. v. E.P.A., 716 F.2d 915 (D.C.  Cir.
1983).

     20     Buckhannon Board and Care Home, Inc. v. West Virginia
Dep't of Health and Human Resources, 532 U.S. 598 (2001).

     21    In Sanders v. Barth, 12 P.3d 766 (Alaska 2000), we held
that  where  cases are settled without any reference to  Rule  82
attorney's  fees, such fees may not be awarded.   But  given  the
suspect  conduct of Bryant or Mascot in bypassing the  employees'
attorney in reaching settlement, we decline to apply the rule  of
Sanders to this case.

     22     Hennigan,  749 F.2d at 1151.   See also  Envtl.  Def.
Fund,  716  F.2d at 919-20; Johnston v. Jago, 691 F.2d  283,  286
(6th  Cir. 1982); Harrington v. DeVito, 656 F.2d 264, 266-67 (7th
Cir. 1981); United Handicapped Fed'n v. Andre, 622 F.2d 342, 345-
46  (8th  Cir. 1980); Operating Eng'rs Local Union No. 3  of  the
Int'l  Union of Operating Eng'rs v. Bohn, 737 F.2d 860, 863 (10th
Cir.  1984); Nadeau v. Helgemore, 581 F.2d 275, 280-81 (1st  Cir.
1978).

     23    Nadeau, 581 F.2d at 278.

     24    Posada, 716 F.2d at 1072.

     25    Id.

     26    Hennigan, 749 F.2d at 1152-53.

     27    Alaska R. Civ. P. 82(b)(2) states:

          In   cases  in  which  the  prevailing  party
          recovers  no money judgment, the court  shall
          award  the prevailing party . . . in  a  case
          resolved  without  trial 20  percent  of  its
          actual attorney's fees which were necessarily
          incurred.  The actual fees shall include fees
          for  legal work customarily performed  by  an
          attorney  but  which  was  delegated  to  and
          performed  by an investigator, paralegal,  or
          law clerk.
          
     28    AS 23.10.110(c) states, in part:

          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 except as provided in (e)-(h)  of
          this section, reasonable attorney fees to  be
          paid by the defendant.
          
AS  23.10.110(e)-(h)  establish  a  good  faith  defense  for  an
employer  who  shows by clear and convincing  evidence  that  the
employer  had reasonable grounds for believing that  the  act  or
omission was not in violation of AS 23.10.060.