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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Industrial Commercial Electric, Inc. v. McLees (11/12/2004) sp-5843

Industrial Commercial Electric, Inc. v. McLees (11/12/2004) sp-5843

     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,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA


INDUSTRIAL COMMERCIAL    )
ELECTRIC, INC., an Alaska          )    Supreme Court No. S-10447
Corporation, and MICHAEL W.   )
HANNAMAN,                )    Superior Court No. 3AN-00-10941 CI
                              )
             Appellants,      )    O P I N I O N
                              )
     v.                       )    [No. 5843 - November 12, 2004]
                              )
RICK L. McLEES, individually,      )
RICK L. McLEES d/b/a RICKY    )
McLEES ELECTRIC, JANET        )
McLEES, McLEES ELECTRIC, LLC, )
and MICHAEL LANDOWSKI,        )
                              )
             Appellees.            )
                              )



          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Mark Rindner, Judge.

          Appearances:  Verne E. Rupright,  Rupright  &
          Foster, LLC, Wasilla, for Appellants.  Erling
          T.   Johansen,   Davison  &  Davison,   Inc.,
          Anchorage, for Appellees.

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

          EASTAUGH, Justice.
          BRYNER,  Chief Justice, with whom  CARPENETI,
          Justice, joins, dissenting.
I.   INTRODUCTION

          After  Industrial Commercial Electric, Inc. (ICE)   and

Michael Hannaman filed suit against a former employee and others,

the  superior  court  dismissed their suit on  summary  judgment,

holding it was barred by releases they signed before filing suit.

But  the  validity  of  the  releases raises  genuine  issues  of

material  fact,  because  there are unresolved  factual  disputes

about  whether  the employee fraudulently misrepresented    facts

and whether ICE and Hannaman were induced to sign the releases in

justifiable  reliance  on those alleged  misrepresentations.   We

therefore reverse and remand for further proceedings.

II.  FACTS AND PROCEEDINGS

          Michael  Hannaman is president and majority shareholder

of  ICE.  In mid-1998 he had a dispute with an ICE employee, Rick

McLees, about McLeess relationship with ICE.1

          The  employment relationship had begun to erode in  the

summer of 1998 when Hannaman suspected that McLees and his  wife,

Janet  McLees,  had taken some of  ICEs corporate  files  without

Hannamans  permission.   The  McLeeses  possessed  most  of  ICEs

accounts  receivable  files, original contract  files,  and  bank

statements.  Hannaman  contacted  Janet  McLees  and  asked   the

McLeeses  to return the documents. Although Janet McLees admitted

that  she and her husband had ICEs files at their home,  she  did

not  comply  with  Hannamans request.  In an  attempt  to  regain

control  of  his company, Hannaman removed Rick McLees  from  the

corporate  checking account and changed the lock on the corporate

mailbox.

          Rick McLees resigned from his positions as an employee,

electrical administrator, and corporate officer of ICE in October

1998.2   Hannaman and Rick and Janet McLees then entered into  an

oral  agreement,  which ended Rick McLeess employment  with  ICE.

Per  the oral agreement, the McLeeses promised to return  all  of

ICEs bank records and contract and accounts receivable files.  In

exchange,  Hannaman also agreed to compensate  Rick  McLees  upon

completion  of  two  outstanding  projects,  which  the   parties

referred to as the Tesoro projects.  The parties agreed that upon

completion  of the Tesoro projects, the McLeeses were  to  return

all  property  purchased  or taken to Fairbanks  for  the  Tesoro

projects   and   contact  [Hannaman]  through   their   attorneys

          immediately upon returning to Anchorage . . . at which time

[they]  would together divide the contents of the [company]  van.

The parties also agreed that the McLees were to return everything

else  belonging  to [Hannaman] or ICE, Inc. in  their  possession

and/or control.

          In an affidavit he later executed, Hannaman stated that

based on Rick and Janet McLees representations and promises . . .

[he]  agreed  to settle with the McLees.  The parties  agreed  to

memorialize their oral agreement in a formal settlement agreement

and mutual release.

          Per  the  oral agreement, Hannaman went to the McLeeses

home  on  October 19, 1998 to inspect the van used  to  transport

equipment  for  the  Tesoro projects and  to  collect  any  tools

belonging to ICE.  Although Hannaman recovered some of his  tools

from  the  McLeeses  home, Rick McLees refused  to  let  Hannaman

inspect  the  companys utility trailer or the McLeeses  padlocked

storage  shed.   When  Hannaman returned to  pick  up  additional

materials,   Rick   McLees   gave  Hannaman   additional   tools,

representing [that these were] the only materials left over  from

the Tesoro projects.

          On  November  10 Hannaman, ICE, Rick and Janet  McLees,

and their attorneys met for the purpose of entering into a twenty-

nine  page written final settlement agreement and mutual releases

memorializing their prior oral agreement.  The agreement  recited

as   consideration   fulfillment  of  various  undertakings   the

signatories  were to accomplish.  These provisions required  Rick

McLees  to do certain things, including some in the future  (such

as completing work on specific ICE contracts with third persons).

The provisions also required Rick McLees to do certain things  by

November 10, including returning all corporate records, mail, job

files,  [and] project records for specified projects;  furnishing

information to allow ICE to bill for change orders or extra  work

on  those  projects;  and returning . .  .  all  other  corporate

property.  The written agreement contained broadly worded  mutual

releases.  The agreement also stated that Rick McLees,  Hannaman,

and  ICE released each other from any potential claims which were

known, or which may be subsequently discovered and which are  not

yet known to the parties at this time.

          Paragraph  29  of the written agreement  provided  that

Hannaman, individually and as president of ICE,

                acknowledges  that Rick L.  McLees  has
          tendered  all  performances  due  under  this
          settlement agreement and mutual release;  and
          that    Michael   Hannaman   and   Industrial
          Commercial   Electric,  Inc.  have   actually
          received  full,  complete,  and  satisfactory
          performance. . . . [T]o the extent that  Rick
          L.   McLees   has  not  tendered   full   and
          satisfactory   performance   of   all    such
          obligations, Michael Hannaman and  Industrial
          Commercial  Electric, Inc. hereby  waive  and
          release  Rick  L.  McLees  from  any  further
          obligation.
          
The  agreement  stated  that it represented  the  parties  entire

agreement  and  superseded any and all prior and  contemporaneous

agreements, promises, representations, warranties, contracts  and

covenants, oral or written, relating to such subject  matter.   A

second  mutual release released Janet McLees, Hannaman,  and  ICE

from  any present or future claims any party may have had against

the  others.  ICE also executed a bill of sale to Rick McLees for

the  company  van,  a  laptop computer, a  utility  trailer,  and

miscellaneous tools.

          Before Hannaman signed the releases for himself and ICE

at  the  November  10 meeting, Hannamans attorney,  Grant  Watts,

asked  the  McLeeses whether they had any corporate  property  to

return  to  ICE  and  whether  they had  any  corporate  property

remaining at their home or in their garage or shed.  According to

Hannamans February 6, 2001 affidavit, the McLeeses said they  did

not  have anything else to return except a wire cart and  a  rug.

Hannamans  affidavit stated that Watts then  asked  the  McLeeses

whether  they  had  any other files belonging  to  ICE  in  their

possession.   According  to  Hannamans  affidavit,  the  McLeeses

responded  that  the  two boxes they brought  with  them  to  the

meeting  were  the  only files they still  possessed.   Hannamans

affidavit  stated that the McLeeses attorney, Paul Crowley,  also

asked his clients if they had anything else to return.  According

to  Hannamans affidavit, the McLeeses responded that  they  could

not  think of anything else.  In an affidavit he executed January

9,  2001,  Watts  attested that, I advised Mr.  Crowley  (in  the

presence  of  Rick  McLees and Janet McLees)  that  ICE  and  Mr.

Hannaman  were relying upon the representations on  the  part  of

Rick  and  Janet  McLees  in regards to signing  the  [settlement

agreement and mutual releases].

          The   parties   executed   the  settlement   documents,

apparently after these conversations took place.  Hannaman  later

attested  in  his affidavit that as of the close of  business  on

November  10,  the McLeeses had not returned all of Hannaman  and

ICEs  property  that  they  had  in their  possession,  including

contract  and change order files for the Sisters Island  project.

Rick  McLees  had only submitted one bill for the Sisters  Island

project  to  Hannaman and ICE.  Hannamans affidavit  also  stated

that  the  McLeeses also had not returned itemized  invoices  for

tools that Rick McLees had purchased on ICEs account and did  not

disclose or return seven other items of equipment.

          ICE  and Hannaman, in his individual capacity, filed  a

complaint  in  superior court in October 2000  against  (1)  Rick

McLees alleging breach of fiduciary duty, breach of contract, and

interference with contractual relationship; (2) Rick  McLees  and

Janet   McLees   alleging  misrepresentation,  fraud,   coercion,

interference   with   prospective  economic   relationship,   and

emotional   distress;  (3)  Michael  Landowski,   an   apprentice

electrician, alleging breach of the duty of good faith  and  fair

dealing and emotional distress; and (4) Crowley & Hiemer, the law

firm that represented the McLeeses, and lawyers Paul Crowley  and

Linda  J.  Hiemer  individually, alleging economic  coercion  and

emotional distress.

          The  McLees defendants (Rick McLees, Rick McLees  d/b/a

Ricky  McLees Electric, Janet McLees, McLees Electric,  LLC,  and

Michael  Landowski) filed counterclaims against Hannaman and  ICE

for,  among  other  things, breach of contract,  quantum  meruit,

interference   with  contractual  relations,  tortious   business

destruction,   business  or  professional  defamation,   punitive

damages, and abuse of process.

          The  McLees  defendants  moved  for  summary  judgment,

arguing  that  all  of   plaintiffs claims  were  barred  by  the

settlement agreement and mutual releases.  The Crowley defendants

(Paul Crowley, Linda Hiemer, and Crowley & Hiemer, LLC) moved for

summary  judgment on Hannaman and ICEs economic  coercion  claim.

In  opposing  these  motions, Hannaman submitted  the  previously

discussed affidavits he and Grant Watts executed in 2001, and the

affidavit of Dean Pratt, a former ICE employee.

          The  superior  court granted summary  judgment  to  all

defendants,  and dismissed all of ICE and Hannamans claims.   The

court  held  that  none  of the defendants  acted  coercively  or

fraudulently.   The  court also held that  if  the  McLeeses  had

misrepresented facts, their misrepresentations were not  material

to  Hannaman  and  ICEs  decision to enter  into  the  settlement

agreement and mutual releases.  Finally, the court concluded that

the  settlement agreement released all defendants from the claims

brought  by  ICE and Hannaman.  The court observed  that  [t]hese

agreements  are  very  extensive and this court  finds  that  the

parties  intended  them to bar any further  litigation  over  the

parties business relationship.

          Hannaman and ICE appeal the summary judgment.3

III. DISCUSSION

     A.   Standard of Review

          We  review grants of summary judgment de novo and  will

uphold  a  grant of summary judgment when the record shows  there

are  no  genuine issues of material fact and the moving party  is

entitled  to  judgment  as a matter of law.4   A  party  opposing

summary  judgment need not prove that it will prevail  at  trial,

          but only that there is a triable issue of fact.5  We draw all

reasonable  inferences of fact in favor of the non-moving  party,

applying  our independent judgment to any questions  of  law  and

adopting  the rule of law most persuasive in light of  precedent,

reason, and policy.6

     B.   The Settlement Agreement and Mutual Releases Will Not Bar

          Hannaman and ICEs Claims if the Agreement and Releases Are

          Invalid.

          Hannaman  argues  that  the  settlement  agreement  and

mutual releases do not bar his claims against the McLeeses.7   He

argues that the releases, like other contracts, may be avoided if

he  entered into them as a result of fraud, misrepresentation, or

duress  attributable  to  the McLeeses.  Hannaman  contends  that

because  he  is  challenging the validity of  the  releases,  the

language and scope of the releases is irrelevant.

          The  McLeeses  argue that all of Hannamans  claims  are

released  by  the settlement agreement and mutual releases.   The

McLeeses contend that it was the intent of the parties when  they

signed  the agreement and releases to dispose of all those claims

whether  known or unknown and that the parties had  washed  their

hands of their relationship.8

          We  have  explained that a valid release of all  claims

arising under a contract will bar any subsequent claims based  on

that  contract.9  We have given effect to mutual  releases,  even

when parties did not specifically list all possible claims.10  The

McLeeses  rely on Martech Construction Co. v. Ogden Environmental

Services,  Inc., in which we held that the broad  language  of  a

release precluded a subcontractors claim against a contractor for

post-settlement conduct.11  We stated, [t]he broad language  used

[in   the   release]   implies  that  claims   not   specifically

contemplated are settled.12

            Martech, however, dealt with the scope of the release

and not the validity of the contract containing the release.   We

have held that settlement agreements and releases, like any other

          contracts, are susceptible to attack for mistake, fraud,

misrepresentation, and duress.13  In Old Harbor Native  Corp.  v.

Afognak  Joint  Venture, we held that a settlement agreement  and

release  did  not preclude misrepresentation and  mutual  mistake

claims.14  We distinguished Martech by observing that claims  for

fraud, misrepresentation, and  mistake challenge the validity and

effectiveness of the release agreement, not its scope  the  issue

that Martech addresses.15

          Likewise, the settlement agreement and mutual  releases

in  this  case would not necessarily bar Hannamans claims against

the McLeeses if the contracts containing the releases are held to

be  invalid  because Hannaman was induced to enter into  them  by

fraud, misrepresentation, or duress attributable to the McLeeses.

Although  the agreements provide that Hannaman acknowledged  that

Rick  L.  McLees  has tendered all performances  due  under  this

Settlement Agreement and that Hannaman release[d] Rick L.  McLees

from  any further obligation and also released Janet McLees  from

all  claims and causes of action, Hannamans claims challenge  the

manner in which the releases were obtained, not the scope of  the

contracts provisions.

     C.   There Are Genuine Issues of Material Fact About Whether the

          McLeeses Fraudulently Induced Hannaman To Enter into the

          Settlement Agreement and Mutual Releases.

          Hannaman  argues  that  the  superior  court  erred  in

granting summary judgment to the McLeeses because he claims  that

there  are  genuine  issues of material fact  about  whether  the

McLeeses  made fraudulent statements to induce him  to  sign  the

settlement  agreement  and  mutual  releases.   To  support  this

assertion,  Hannaman  refers  us to  his  affidavit  and  to  the

affidavits of Dean Pratt and Grant Watts.

          We  must  first consider whether the affidavits contain

admissible  evidence for the purposes of satisfying Alaska  Civil

Rule  56(e).   The McLeeses argue that the three  affidavits  are

inadmissible because, they claim, the affidavits contain  hearsay

          and do not demonstrate competency to testify.16  We reject this

argument.    The  affiants  each  described  events  which   they

witnessed.   Most of the conversations they described  were  with

the  McLeeses  individually or with the McLeeses  attorney.   The

McLeeses  statements  to  Hannaman,  Watts,  or  Pratt  would  be

admissible  as  non-hearsay admissions by party  opponents  under

Alaska  Rule  of  Evidence  801(d)(2).   The  McLeeses  attorneys

statements would also be nonhearsay under that rule if  he  spoke

for  the McLeeses, or under Alaska Rule of Evidence 801(d)(1)  if

he was available to testify to his own prior statements at trial.17

          We have recognized that a party induced by a fraudulent

or  material  misrepresentation to enter into a contract  may  be

able  to avoid the contract.18  Restatement (Second) of Contracts

164  (1981)  states  that a contract is voidable  [i]f  a  partys

manifestation  of assent is induced by either a fraudulent  or  a

material  misrepresentation by the other  party  upon  which  the

recipient  is justified in relying.  This statement is consistent

with what we have said in the past about this ground for avoiding

a contract.19  Per section 164 and our case law, to prove that the

McLeeses  fraudulently induced him to enter  into  the  releases,

Hannaman  must  show that (1) there was a misrepresentation;  (2)

the  misrepresentation was fraudulent; (3) the  misrepresentation

induced  Hannaman to enter into the contract; and  (4)  Hannamans

reliance  on the misrepresentation was justified.20  Viewing  the

evidence in a light most favorable to Hannaman, there are genuine

issues   of  material  fact  about  whether  the  McLeeses   made

fraudulent   misrepresentations   during   settlement   agreement

discussions and thereby induced Hannaman to release all potential

claims.

          Issue  of Misrepresentation.  Before the parties signed

the  settlement agreement and releases on November 10, 1998,  the

McLeeses  represented to Hannaman and his attorney that they  had

returned  all  of  ICEs property, including tools  and  corporate

files,  except for a wire cart and a rug, which they promised  to

          return.  The McLeeses further represented that they did not have

any of ICEs or Hannamans property in their home, garage, or shed.

          Hannaman  produced  evidence,  however,  permitting  an

inference that the McLeeses falsely misrepresented that they  had

returned  all  of ICEs and Hannamans property.  The affidavit  of

Dean  Pratt  suggests that the McLeeses may have  been  harboring

ICEs property as of October 1998.  According to Pratts affidavit,

he  and  Michael Landowski, another crew member on ICEs  projects

for  Tesoro  in  Fairbanks, took tools and  equipment  that  were

designated  for  those  jobs to the McLeeses  Anchorage  home  on

October  2,  1998.   Pratt stated that at Rick  McLeess  request,

Pratt  and  Landowski stash[ed] the tools and  equipment  at  the

McLeeses  home.  While Pratt was unloading materials, he  noticed

that  the  McLeeses  garage and storage  shed  were  filled  with

electrical tools and equipment.  Pratt attested that Rick  McLees

told  me the tools and materials we were unloading would  not  be

needed  to  complete the Tesoro projects . .  .  [and  that  Rick

McLees] didnt want Mike Hannaman to know that he was taking stuff

and  hiding  it.  Pratt further attested that when he, Landowski,

and Rick McLees returned to Fairbanks, McLees told Mike Landowski

and me that he didnt want Mike Hannaman to know that [McLees] had

to reorder materials.

          In  his  own  affidavit, Hannaman stated that  per  the

October  2 oral agreement he went to the McLeeses home to  divide

the  tools used for one of the Tesoro projects. Although Hannaman

recovered some of ICEs tools from Rick McLees, McLees refused  to

let Hannaman inspect the companys utility trailer.  When Hannaman

returned  to  pick  up  additional  materials  from  the   Tesoro

projects,  the McLeeses garage door was closed and their  storage

shed  was padlocked.  Rick McLees gave Hannaman a few other tools

and  materials, representing [that these were] the only materials

left over from the Tesoro projects.

          Although  the McLeeses returned some items to Hannaman,

there is a factual dispute over whether they still possessed some

of  ICEs  property as of November 10, 1998.  For instance,  Pratt

attested  that  he unloaded approximately twenty  to  twenty-five

spools of electrical wire, many of which were full spools, at the

McLeeses  home.  Hannaman attested in his affidavit  that  as  of

November  1998,  the  McLeeses had not returned  full  spools  of

electrical wire, among other things.

          The McLeeses also maintained at the November 10 meeting

when  the parties signed the releases that they had returned  all

of  ICEs  corporate files.  Hannaman, however, later attested  in

his  affidavit  that he had not received some of  ICEs  corporate

documents that the McLeeses had in their possession, including  a

contract  and  change order file for the Sisters Island  contract

and itemized invoices for tools that Rick McLees had purchased on

ICEs  account.   Therefore, drawing all inferences  in  favor  of

Hannaman, there is a genuine issue of material fact about whether

the  McLeeses  November 10 representation that they had  returned

all of ICEs corporate property was false.

          Issue of Fraudulent Misrepresentation.  Evidence in the

record  also  permits  an  inference that  the  McLeeses  alleged

misrepresentation  was  fraudulent.21   A  misrepresentation   is

fraudulent  if  it is consciously false and intended  to  mislead

another.22   There is evidence permitting an inference  that  the

McLeeses  knew that their representation was false and that  they

intended  to  induce  Hannaman into signing the  releases.   Rick

McLees allegedly personally ordered Pratt and Landowski to  store

the  tools  and  equipment from the Tesoro jobs at  his  home  in

October  1998 without Hannamans knowledge.  Rick McLeess apparent

awareness that the property did not belong to him is evidenced by

his  alleged statement to Pratt that he did not want Hannaman  to

know  that he was taking equipment and hiding it at his  home  or

that  he was reordering equipment on ICEs account to replace  the

tools  he  had  taken.  Rick McLeess subsequent  refusal  to  let

Hannaman inspect the companys trailer or the McLeeses garage  and

storage  shed  for  any  ICE property also permits  a  reasonable

          inference that he may have been knowingly hiding equipment from

Hannaman.   There was therefore evidence permitting an  inference

that  as of November 10, Rick McLees knew that his representation

that he had returned all property to Hannaman was false.

          The   evidence  also  permits  an  inference  that  the

McLeeses  intended  Hannaman  to  enter  into  the  contracts  in

reliance  on  their representations.  Because Hannaman  had  been

trying   to  recover  ICEs  property  from  the  McLeeses   since

approximately  July 1998, the McLeeses were on sufficient  notice

that the return of ICEs property was one of Hannamans priorities.

Rick  McLeess alleged concealment of ICEs tools at his  house  in

October  also suggests that he intended Hannaman to rely  on  his

representation that he had returned all of ICEs property.

          Issue  of  Inducement.  To avoid the releases, Hannaman

must  show  that the McLeeses alleged misrepresentations  induced

him  to  enter into the releases.23  Hannaman maintained  in  his

affidavit  that  he agreed to settle with the  McLeeses  in  part

because  they promised to return his property.  When the McLeeses

represented  to  Hannaman  that they had  returned  all  of  ICEs

property  before Hannaman and ICE signed the releases,  Hannamans

attorney  told  the  McLeeses  attorney,  Paul  Crowley,  in  the

presence of Rick and Janet McLees that ICE and Mr. Hannaman  were

relying  upon the representations on the part of Rick  and  Janet

McLees,  in  regards  to  signing the [settlement  agreement  and

mutual releases].  Based on this evidence, we can infer that  the

McLeeses  representations  induced Hannaman  to  enter  into  the

releases.

          Issue  of Justifiable Reliance.  Evidence also  permits

an  inference  that  Hannaman was justified  in  relying  on  the

McLeeses  representations.  Because Rick McLees  refused  to  let

Hannaman  search  his  garage or shed  or  the  company  trailer,

Hannaman  was  unable  to conduct an independent  search  of  the

McLeeses  home for ICEs tools and files.  There is evidence  that

the  McLeeses reassured Hannaman in October and again on November

          10, in the presence of the parties attorneys, that they had

returned  everything  belonging  to  ICE  and  Hannaman.   Before

signing  the  agreement  and releases,  Hannaman  was  unable  to

independently confirm the veracity of their representations.

          Some courts appear to have held as a matter of law that

releasing   parties   were   not   justified   in   relying    on

representations  of  the  released party  made  at  the  time  of

settlement,  at  least when the controversy being settled  itself

alleged  fraud  or  dishonesty.24   There  is  authority  to  the

contrary.  For example, in Sims v. Tezak, the Illinois  Court  of

Appeals, applying Illinois law, held that justifiable reliance is

always  a question of fact for the jury, even if the parties  who

executed a broad release relied on representations of a party  it

had  reason to mistrust.25  In support, it quoted a federal  case

applying Illinois law:

          Illinois  law has long held that,  where  the
          representation is made as to a fact  actually
          or    presumptively   within   the   speakers
          knowledge, and contains nothing so improbable
          as  to  cause doubt of its truth, the  hearer
          may  rely upon it without investigation, even
          though the means of investigation were within
          the  reach  of  the  injured  party  and  the
          parties  occupied adversary positions  toward
          one another.  [T]he fraud-feasor will not  be
          heard to say that he is a person unworthy  of
          belief,  and that plaintiff was negligent  in
          trusting him, and was cheated through his own
          credulity.[26]
          
          We  think it better not to hold as a matter of law that

a   releasing  party  is  never  justified  in  relying  on  fact

representations of a released party during settlement  of  claims

which accused the released party of fraud or dishonesty.  Such  a

rule   would  effectively  encourage  misrepresentations   during

settlement negotiations in such cases and would potentially chill

their settlement.

          It  would also potentially fail to distinguish  between

disputes   which  exclusively  involve  claims   of   fraud   and

dishonesty,  and  those  in which such claims  are  ancillary  or

          alternative or are the product of overheated pleading.  Whether

reliance is justified in a given case seems to us more likely  to

turn  on  the course of dealings between the parties  before  and

during  the  dispute. And in this case, it is relevant  that  the

settlement  agreement  potentially required  Rick  McLees  to  do

things  following the settlement (such as perform punch-list  and

remedial work on several projects, provide as-built drawings  and

other  things, and provide certain documentation by December  30,

1998).   This  implies that, notwithstanding claims of  fraud  or

dishonesty,  there was sufficient trust that the parties  thought

they   could  rely  on  McLeess  future  performance   of   these

undertakings.

          We  conclude  that  Hannaman  is  not  foreclosed  from

proving the element of justifiable reliance.

          We  therefore conclude that there are genuine issues of

material   fact   about   whether   the   McLeeses   fraudulently

misrepresented facts and thereby induced Hannaman to  enter  into

the  settlement agreement and mutual releases, and about  whether

Hannamans  reliance was justified.  We consequently  reverse  the

grant of summary judgment.

          Hannaman  also argues that the superior court erred  in

holding  that  the McLeeses alleged misrepresentations  were  not

material.27   A misrepresentation is material if it would  likely

induce a reasonable person to manifest his assent.28  Because  we

have  concluded  there  are genuine triable  issues  whether  the

McLeeses   fraudulently  induced  Hannaman  to  enter  into   the

releases,  we  do  not  need  to  decide  whether  the   McLeeses

misrepresentations  were material or whether  there  are  genuine

factual disputes about their materiality.

          Hannaman alternatively also argues that the release was

the  product of economic coercion.  We conclude that Hannaman did

not  present  sufficient evidence to create a  genuine  issue  of

material fact with respect to his economic coercion claim.

IV.  CONCLUSION

          We  REVERSE the order granting summary judgment against

ICE and Hannaman, and remand for further proceedings.

BRYNER, Justice, with whom CARPENETI, Justice, joins, dissenting.

          The  crux  of Hannamans attempt to avoid his settlement

is  his  assertion that the McLeeses fraudulently  misrepresented

their  compliance with the settlements requirements  and  induced

him  to  sign  through their fraud.  In rejecting this  claim  on

summary judgment, the superior court found that the record failed

to support it.  I would affirm the superior courts ruling.

          As  todays  opinion  acknowledges, Hannamans  claim  of

fraudulent  inducement  required  him  to  prove  four   separate

elements:  misrepresentation, fraud (or  at  least  materiality),

inducement,  and justified reliance.1  To withstand the  McLeeses

motion  for summary judgment, then, Hannaman needed to  offer  at

least  some evidence supporting each of these elements.  Although

the  record  in  this case might be construed to  meet  Hannamans

threshold  burden as to the first three elements, I fail  to  see

how  it   provides  any  glimmer of hope on  the  final  element:

justified reliance.

          The   undisputed   facts  before  the  superior   court

establish  that over the summer of 1998 Hannaman became embroiled

in a dispute in which he accused the McLeeses of participating in

an  ongoing  course  of  fraudulent  conduct  by  concealing  and

converting his corporate assets  ICEs records, its equipment, and

its   work.    The  McLeeses  adamantly  denied  any  wrongdoing,

repeatedly  asserted  that  they  had  no  significant  corporate

property,  and  consistently refused to cooperate with  Hannamans

demands  for information.  Frustrated by the McLeeses denial  and

resistance,  Hannaman eventually negotiated an oral agreement  to

settle  his claims on condition that the McLeeses return whatever

corporate records and property they had in their possession.  The

following month, after Hannaman had an opportunity to ensure that

the  McLeeses met these conditions, the parties formalized  their

arrangement  by  signing  a  detailed settlement  contract   that

mutually  released  all past and future foreseeable  claims.   As

part  of  the  written  settlement contract,  Hannaman  expressly

          acknowledged that the McLeeses had performed all  their

obligations  under  the  agreement.  Beyond  that,  the  contract

disavowed  Hannamans reliance on representations by the  McLeeses

and stated that Hannaman had been given ample time to confirm the

McLeeses compliance.  Moreover, the contract sought to avert  any

future  allegations  that the McLeeses had  misrepresented  their

compliance  with the agreement, unequivocally requiring  Hannaman

to  bear the risk of noncompliance: [T]o the extent that Rick  L.

McLees has not tendered full and satisfactory performance of  all

such   obligations  [under  the  settlement  agreement],  Michael

Hannaman . . . hereby waive[s] and release[s] Rick L. McLees from

any further obligation.

          Hannaman  now seeks to avoid the consequences  of  this

agreement by offering the affidavit of  Grant Watts, the attorney

who  represented him at the time of the settlement.  Watts  avers

that just before the settlement was signed, he asked the McLeeses

a series of questions designed to elicit assurances that they had

fully  complied with the agreement; then, according to Watts,  he

told the McLeeses attorney that ICE and Mr. Hannaman were relying

upon the representations on the part of Rick and Janet McLees  in

regards  to  signing the [agreement].  Hannaman then  signed  the

settlement  contract, whose express terms disclaimed reliance  on

any representations by the McLeeses.

          Surely   a  prima  facie  case  of  justified  reliance

requires something more than this.  As a matter of law, the terms

of  the parties fully integrated written agreement could not have

been   modified  by  Wattss  unilateral  and  self-serving   oral

assertion of Hannamans intent to rely on the McLeeses assurances.

Nor,  as  a  matter of fact, could Wattss nudge-nudge,  wink-wink

assertion  of  intended reliance support a  reasonable  inference

that  Hannamans reliance would be justified given the  undisputed

language  of  the settlement contract  particularly  its  express

disavowal of any reliance on the McLeeses representations.

          In  fact,  it seems hard to imagine any weaker evidence

purporting  to  show  that  the McLeeses  last-minute  assurances

caused  Hannaman  to be justifiably  that is, reasonably   misled

into  surrendering  all  future claims  against  them  (including

claims   for  misrepresentation).   For  if  Hannaman   genuinely

believed  the  allegations  he  had  himself  repeatedly  leveled

against the McLeeses  over their constant assurances of innocence

during the months preceding the settlement, then it seems fair to

wonder  how  another round of the same assurances moments  before

signing  the  settlement agreement could have reasonably  induced

him  to settle.  Would any reasonably prudent person in Hannamans

shoes  have been misled by the McLeeses statements?  The  obvious

answer is no.  It defies common sense to think that a fair-minded

person  could  infer,  on  this evidence  alone,  that  Hannamans

reliance was justified.

          The   basic  proposition  is  simple:  Hannaman  cannot

wilfully  blind  himself to the telltale  presence  of  potential

fraud in settling with the McLeeses, and then plausibly blame the

McLeeses for his failure to see it.

          Abundant  case law joins common sense to  support  this

conclusion.   The  Virginia  Supreme  Court,  Eleventh   Circuit,

Florida  Supreme  Court, Second Circuit,  and  Indiana  appellate

courts have all held that justified reliance generally cannot  be

found  when  a  party  who  has settled a  dispute  over  alleged

dishonesty  later claims to have been misled by false  assurances

of honesty on the part of the allegedly dishonest party.

          In  Metrocall of Delaware, Inc. v. Continental Cellular

Corp.,2   a  group  of  minority  shareholders  sued  a  majority

shareholder,   alleging   self-dealing,   failure   to   disclose

information,  and  other  fraudulent  and  dishonest  acts.   The

litigation settled, with all parties executing a general release.

The  minority shareholders later discovered that at the  time  of

the settlement the majority shareholder did not disclose that  it

was   in   negotiations  to  sell  the  company.   The   minority

shareholders  filed a second lawsuit, alleging that the  majority

          shareholder had fraudulently induced them to settle.  But the

Supreme  Court of Virginia rejected this claim, holding that  the

minority shareholders fraudulent-inducement claim failed  because

they   could   not  justifiably  have  relied  on  the   majority

shareholders   representations  at  the  time   of   settlement.3

Observing that the fraud alleged in the second lawsuit was within

the  scope of the broad release contained in the settlement,4 the

court  ruled  as  a  matter  of  law  that  when  negotiating  or

attempting  to  compromise an existing  controversy  over  fraud,

dishonesty, and self-dealing, it is unreasonable to rely  on  the

representations of the allegedly dishonest party.5

          Two  federal cases interpreting Florida law have upheld

the  same  proposition.  In Pettinelli v. Danzig,6  the  Eleventh

Circuit  considered  a  Florida  case  in  which  the  plaintiff-

appellants were investors who settled an unlitigated dispute with

a  companys  officers  in which the investors  alleged  that  the

officers had fraudulently induced them to invest.  The settlement

agreement included a release of all claims arising out of actions

up  to the date of the settlement.  The investors later sought to

rescind the settlement as fraudulently induced.  But the Eleventh

Circuit  ruled  that  even  if  the officers  had  made  material

misrepresentations, the investors could not justifiably  rely  on

them.   The  court  emphasized that one of the investors  was  an

attorney  who  should  have understood the  consequences  of  the

release and that the investors had not insisted on examining  the

companys  books before signing the release.  The court  therefore

affirmed  summary judgment for the defendants, holding,  just  as

the  Virginia Supreme Court did in Metrocall, that in settling  a

claim  of  dishonesty  or  fraud  the  accusing  party  may   not

justifiably    rely   on   the   allegedly   fraudulent    partys

representations.7

          Another   Eleventh   Circuit   decision,   Mergens   v.

Dreyfoos,8   considered   a  case  in   which   former   minority

shareholders  executed  a  stock repurchase  agreement  with  the

          majority; the agreement included a general release clause

applicable  to all claims accrued as of the day of the agreement.

The  shareholders claimed that they had been told by the  company

that  it did not contemplate any sales of its assets.  The former

shareholders then learned the very next day that the company  had

made a very profitable sale of an asset.  The former shareholders

sued  for  fraud.   The  court noted that  before  executing  the

agreement, the plaintiffs had complained that the defendants were

mismanaging  the  corporation and wasting  its  assets,  and  had

threatened  to sue the majority shareholders if they  refused  to

buy  back  the  minoritys shares.  The parties thus  had  a  pre-

existing adversarial relationship before signing the release, and

they  signed the release in light of the threatened legal action.

Observing   that  in  these  circumstances  [a]  more  untrusting

relationship  is difficult to imagine, the court  concluded  that

reliance by the plaintiffs was unjustified as a matter of law.9

          In  Bellefonte  Re Insurance Co. v. Argonaut  Insurance

Co.,10  the Second Circuit, applying New York law, considered  an

analogous  claim  and reached the same conclusion,  holding  that

Plaintiffs cannot freely, and for consideration, promise  not  to

sue  for  failure to disclose material facts and then claim  that

the promise was fraudulently induced because material information

was, in fact, not disclosed.11

          Indiana  follows  the same rule.  In Prall  v.  Indiana

National Bank, for example, the Indiana Court of Appeals found  a

claim of fraudulent inducement barred in a case arising out of  a

previously  settled  claim of fraud, noting  that,  even  if  the

plaintiff   had   not  disclaimed  reliance  on  the   defendants

representations  in settling the prior claim, reliance  on  those

representations would not have been justified in  an  arms-length

settlement negotiated by a represented plaintiff.12

          A  few scattered cases point in the opposite direction,

resting  their rulings on the proposition that the reasonableness

of  a plaintiffs reliance always presents a question of fact  for

          the jury.13  The court today implicitly follows this minority

position,  effectively holding that, once the plaintiff  produces

some evidence of actual reliance, the issue of justification  can

never  be  decided on summary judgment.  Yet we have declined  to

follow  this  categorical  view  in  analogous  cases  and   have

generally  recognized  that issues  of  fact  such  as  this  may

properly  be  resolved  on  summary judgment  if  the  undisputed

evidence  would  allow  a fair-minded person  to  draw  only  one

reasonable inference.14

          Moreover, the minority view squarely conflicts with the

Restatement. Restatement  164 describes  justified reliance as  a

factual  element that the claimant must prove to avoid a contract

on  the  ground  of  inducement by fraud.  I  see  no  reason  to

conclude that this issue of fact is immune from being decided  on

summary  judgment  when the claimants own evidence  of  justified

reliance categorically rules out the existence of justification.

          Sound  policy,  too,  supports the conclusion  that  no

reasonable  inference  of  justification  can  arise  under   the

circumstances  at  issue here.  Parties accused  of  fraud  would

rarely if ever be encouraged to settle their claims out of  court

if they knew that the law routinely allowed accusers to set these

settlements  aside merely by advancing conclusory  assertions  of

unfair  inducement by the allegedly fraudulent partys purportedly

fraudulent denials of fraud.  It might be argued, of course, that

the  minority  view  reflected  in todays  opinion  advances  the

competing  goal of protecting the rights of all settling  parties

to  rely  on  the  good  faith of their opponents  in  settlement

negotiations.   Yet  this otherwise laudable goal  has  anomalous

consequences   and  ultimately  proves  self-defeating   if   the

presumption  of good faith is applied too rigidly to  settlements

involving accusations of bad faith and fraud; for in this  unique

setting  it inherently tends to operate one-sidedly,  and  so  to

preclude  settlements,  by  exposing accused  parties,  at  their

accusers  option,  to ever-renewable claims of misrepresentation.

          Because it seems to me that Hannaman has failed to produce any

material evidence raising an inference that he justifiably relied

on the McLeeses purportedly fraudulent pre-settlement statements,

I  would  affirm the superior courts order granting the  McLeeses

motion for summary judgment.

_______________________________
     1     Our summary of the facts is derived from the materials
submitted  in  the  summary  judgment  proceedings  below.   When
reviewing  a  grant of summary judgment, we draw  all  reasonable
inferences  of  fact  in  favor of  the  non-moving  party.   See
Meidinger v. Koniag, Inc., 31 P.3d 77, 82 (Alaska 2001).

     2     There  may be a factual dispute whether McLees  was  a
corporate officer when he resigned from ICE in October 1998.  His
letter of resignation stated that he was resigning as a corporate
officer  if  [he  was] in fact a corporate officer.   The  record
indicates that McLees was vice president and secretary  in  1997.
No  evidence brought to our attention establishes that he held  a
corporate office in 1998.

     3     Following a settlement discussion required  by  Alaska
Appellate Rule 221, Hannaman and ICE agreed to dismiss all claims
against  Paul  Crowley, Linda Hiemer, and Crowley &  Hiemer,  LLC
under  Alaska Appellate Rule 511(a).  The Crowley defendants  are
therefore no longer parties to this appeal.

     4     Old  Harbor Native Corp. v. Afognak Joint Venture,  30
P.3d 101, 104 (Alaska 2001).

     5     Alaska  Rent-A-Car, Inc. v. Ford Motor Co.,  526  P.2d
1136, 1139 (Alaska 1974).

     6     Meidinger  v.  Koniag, Inc., 31 P.3d  77,  82  (Alaska
2001).

     7     Unless context requires otherwise (such as when we are
referring  to Hannaman individually as a witness or participant),
we refer to Hannaman and ICE as Hannaman when we are referring to
them collectively as litigants.

     8    The McLeeses argue that the agreement also releases ICE
employee  Michael Landowski.  Quoting the agreement, the McLeeses
argue  that  the  parties intended the release to  inure  to  the
benefit  of  and  shall  be binding on themselves,  shareholders,
officers, directors, agents, employees . . . and attorneys.

     9     Totem  Marine  Tug & Barge, Inc. v.  Alyeska  Pipeline
Serv. Co., 584 P.2d 15, 24 (Alaska 1978).

     10     Alyeska Pipeline Serv. Co. v. Shook, 978 P.2d 86,  89
(Alaska 1999) (holding that release between employer and employee
precluded employees claims).

     11    852 P.2d 1146 (Alaska 1993).

     12    Id. at 1152.

     13    See Old Harbor Native Corp., 30 P.3d at 105; Zeilinger
v.  Sohio  Alaska  Petroleum Co., 823 P.2d  653,  657-58  (Alaska
1992).

     14    Old Harbor Native Corp., 30 P.3d at 105.

     15    Id.

     16     See generally Broderick v. Kings Way Assembly of  God
Church, 808 P.2d 1211, 1215 (Alaska 1991) (If the parties  choose
to  submit  affidavits  [in  support  or  opposition  of  summary
judgment], they must be based upon personal knowledge, set  forth
facts   that   would  be  admissible  evidence  at   trial,   and
affirmatively  show that the affiant is competent to  testify  to
the matters stated.).

     17    See Sopko v. Dowell Schlumberger, 21 P.3d 1265, 1269-70
(Alaska 2001) (holding that workers statements to physician  were
admissible  in  connection  with  summary  judgment   motion   as
admissions of party opponent).

     18     Cousineau v. Walker, 613 P.2d 608, 612 (Alaska  1980)
(citing  Restatement (Second) of Contracts  306 cmt. a (Tentative
Draft  No.  11,  1976) (holding that material  misrepresentation,
either innocent, negligent, or fraudulent, is adequate ground for
avoiding contract).

     19     Bering Straits Native Corp. v. Birklid, 739 P.2d 767,
768  (Alaska 1987) (holding that stock purchaser could not  avoid
contract  on  ground of misrepresentation because  purchaser  had
prior  knowledge  of misrepresentations and material  omissions);
see  also Cousineau, 613 P.2d at 612; cf. Johnson v. Curran,  633
P.2d  994,  997  (Alaska  1981) (citing Restatement  (Second)  of
Contracts   301-15 (Tentative Draft No. 11, 1976)  (holding  that
nightclub  could  not  avoid  contract  on  basis  of  fraudulent
misrepresentation because it did not produce evidence that it was
induced to enter into contract because of misrepresentation).

     20     Bering Straits, 739 P.2d at 768; see also Restatement
(Second) of Contracts  164 (1981).

     21     See  Bering  Straits, 739 P.2d  at  768;  Restatement
(Second) of Contracts  164 (1981).

     22     Restatement (Second) of Contracts  162 cmt. a (1981);
cf. City of Fairbanks v. Amoco Chem. Co., 952 P.2d 1173, 1176 n.4
(Alaska  1998) (citing Bubbel v. Wien Air Alaska, Inc., 682  P.2d
374,  381  (Alaska  1984)  (stating  that  scienter  element   of
fraudulent  misrepresentation damages claim requires  proof  that
the   maker  knew  of  the  untrue  character  of  his   or   her
representation)).

     23     See  Bering  Straits, 739 P.2d  at  768;  Restatement
(Second)  of Contracts  164 cmt. c (1981) (No legal effect  flows
from  either  a  non-fraudulent or a fraudulent misrepresentation
unless  it  induces action by the recipient, that is,  unless  he
manifests his assent to the contract in reliance on it.).

     24     See,  e.g.,  Metrocall  of Delaware,  Inc.  v.  Contl
Cellular  Group,  437 S.E.2d 189, 194, 195 (Va. 1993)  (reasoning
that  it  is unreasonable to rely on the representations  of  the
allegedly dishonest party).

     25     Sims  v.  Tezak, 694 N.E.2d 1015, 1020-21 (Ill.  App.
1998).

     26     Id. (quoting Pattiz v. Semple, 12 F.2d 276, 278 (E.D.
Ill. 1926)) (internal citations omitted).

     27     Even  if  a  misrepresentation is not  fraudulent,  a
contract  may  be voided if the misrepresentation  was  material.
See Cousineau v. Walker, 613 P.2d 608, 612 (Alaska 1980) (holding
that  material misrepresentation, either innocent, negligent,  or
fraudulent, is adequate ground for avoiding contract);  see  also
Restatement  (Second) of Contracts  164 cmt. b (1981)  ([A]  non-
fraudulent misrepresentation does not make the contract  voidable
unless it is material.); Old Harbor Native Corp. v. Afognak Joint
Venture, 30 P.3d 101, 104 (Alaska 2001); Diagnostic Imaging  Ctr.
Assoc.  v.  H&P,  815 P.2d 865, 866-67 (Alaska 1991)  (addressing
claim  that  non-fraudulent misrepresentations  rendered  release
invalid).

     28     Restatement (Second) of Contracts  162 cmt. c (1981);
see also Cousineau, 613 P.2d at 613 (A material fact is one. .  .
.which   could  reasonably  be  expected  to  influence  someones
judgment or conduct concerning a transaction.).

1    Restatement (Second) of Contracts  164 (1981).

2    437 S.E.2d 189 (Va. 1993).

3    Id. at 194.

     4    Id.

     5    Id. at 195.

     6    722 F.2d 706 (11th Cir. 1984).

     7    Id. at 710; see also Mergens v. Dreyfoos, 166 F.3d 1114
(11th  Cir. 1999);  Florida Evergreen Foliage v. E.I.  DuPont  de
Nemours  Co.,  135  F. Supp. 2d 1271 (S.D. Fla.  2001);  Somerset
Pharmaceuticals,  Inc.  v.  Gunster,  Yoakley,   Valdes-Fauli   &
Stewart,  49 F. Supp. 2d 1335 (M.D.  Fla. 1999); Hall  v.  Burger
King Corp., 912 F. Supp. 1509 (S.D. Fla. 1995).

     8    166 F.3d 1114 (11th Cir. 1999).

9     Id.  at  1118; see also Florida Evergreen Foliage,  135  F.
Supp.  2d at 1289-90; Somerset Pharmaceuticals, Inc., 49 F. Supp.
2d at 1340; Hall, 912 F. Supp. at 1524-25.

     10   757 F.2d 523 (2d Cir. 1985).

     11    Id. at 526 (citing Bellefonte Re Ins. Co.  v. Argonaut
Ins. Co., 586 F. Supp. 241, 244 (S.D.N.Y. 1984)).

     12    627 N.E.2d 1374, 1378-79 (Indiana App. 1994); see also
Circle  Centre  Dev.  Co. v. Y/G Indiana, L.P.,  762  N.E.2d  176
(Indiana App. 2002).  Courts in other states have reached similar
conclusions.   See, e.g., Wender & Roberts, Inc. v.  Wender,  238
Ga. App. 355, 360  (1999) (claim of reliance in dispute involving
fraud  unjustified as a matter of law because, [i]n order  for  a
genuine  issue  of  material  fact to  exist  as  to  justifiable
reliance, there must be some evidence that the president and  the
company  exercised their duty of due diligence to  ascertain  the
truth  of the matter); Davis v. Davis, 422 Pa. Super. 410, 417-18
(1993) (rejecting fraudulent inducement claim as a matter of  law
given  adversarial  nature of the parties relationship  and  fact
that claimant was represented by counsel).

13    See,  e.g.,  Chase v. Dow Chemical Co., 875 F.2d  278,  283
(11th  Cir. 1989); Sims v. Tezak, 694 N.E.2d 1015, 1020-21  (Ill.
App.  1998); see also Matsuura v. E.I. Du Pont De Nemours &  Co.,
73 P.3d 687, 701-02 (Hawaii 2003).

     14    For  instance, in Arctic Tug & Barge, Inc. v. Raleigh,
Schwarz  &  Powell,  956  P.2d 1199, 1203-04  (Alaska  1998),  we
affirmed   the  summary  dismissal  of  a  claim  for   negligent
misrepresentation when undisputed evidence showed conduct falling
outside  the  scope of the duty allegedly breached;  we  observed
that  dismissal  on  summary judgment was proper  on  this  issue
because  the  undisputed  record permitted  only  one  reasonable
inference.  Hannamans claim is closely analogous:  In Arctic  Tug
the  plaintiff  alleged  negligent  breach  of  a  duty  when  no
reasonable  inference  of  the dutys existence  arose  under  the
circumstances alleged by the plaintiff; here, similarly, Hannaman
claims  justifiable  reliance when  no  reasonable  inference  of
justification  arises  under  his   asserted  facts.   See   also
Dinsmore-Poff v. Alvord, 972 P.2d 978, 987 (Alaska 1999).