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Catalina Yachts v. Pierce (01/14/2005) sp-5860
Catalina Yachts v. Pierce (01/14/2005) sp-5860
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
CATALINA YACHTS, )
) Supreme Court No. S-10720
Appellant, )
) Superior Court No.
v. ) 1JU-94-02213 CI
)
JIM and KAREN PIERCE, ) O P I N I O N
)
Appellees. ) [No. 5860 - January 14,
2005]
)
Appeal from the Superior Court of the State
of Alaska, First Judicial District, Juneau,
Larry C. Zervos, Judge.
Appearances: Eric A. Kueffner, Faulkner
Banfield, P.C., Juneau, for Appellant. No
appearance by Appellees.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Bryner, Justices. [Carpeneti,
Justice, not participating.]
FABE, Chief Justice.
BRYNER, Justice, dissenting.
I. INTRODUCTION
Jim and Karen Pierce rejected an offer of judgment made
by Catalina Yachts under Alaska Civil Rule 68 in a breach of
warranty case. The superior court denied Catalinas later motion
for attorneys fees and costs under Alaska Civil Rule 68, holding
that the rule did not apply and was preempted by the Magnuson-
Moss Warranty-Federal Trade Commission Improvement Act. Because
we conclude that Alaska Civil Rule 68 applies, we reverse and
remand.
II. FACTS AND PROCEEDINGS
The underlying facts of this case are set out in Pierce
v. Catalina Yachts, a breach of contract and warranty case that
came before us in 2000.1 In summary, Jim and Karen Pierce
purchased a new fiberglass sailboat from Catalina Yachts in 1992.
Under the warranty, Catalina was responsible for repairing any
blisters in the gel coat of the boat that occurred within a year
of the boat being placed in the water. The Pierces claimed that
their boats hull developed blisters and that Catalina was
responsible for repairing the hull under the warranty. The
Pierces were unable to convince Catalina that the gel coat needed
to be replaced.2 They filed suit, bringing claims under the
federal Magnuson-Moss Warranty Federal Trade Commission
Improvement Act3 and under Alaska law.
Before trial, in January 1996, the Pierces rejected a
$38,000 offer of judgment from Catalina, made under Alaska Civil
Rule 68.4 Following trial, the jury awarded the Pierces $12,445
as the reasonable cost of repair.5 The superior court then
calculated the value of the Pierces judgment using the formula we
laid out in Farnsworth v. Steiner.6 Magnuson-Moss provides for
awards of attorneys fees and costs for prevailing consumers like
the Pierces;7 the superior court calculated the Pierces fees and
costs under the federal law through the date of the offer
($22,236). It then added that figure to the jury award ($12,445)
and pre-judgment interest ($1,964), for a total judgment of
$36,645, less than Catalinas offer. Under Rule 68, the Pierces
were therefore barred from receiving post-offer fees and costs
and Catalina was entitled to an award of post-offer fees and
costs as well a reduced pre-judgment interest rate.8 The court
awarded the Pierces $35,721 as their judgment as recalculated
under Rule 68, awarded Catalina $35,211 in post-offer fees and
costs, and offset the two amounts to reach a net award of $510
for the Pierces. Because we held on appeal that the Pierces were
entitled to recover consequential damages on remand, we did not
address the fee awards, apart from concluding that Magnuson-Moss
entitled the Pierces to an award of attorneys fees.9 Following
trial on remand, the jury determined that the Pierces suffered no
consequential damages, and Superior Court Judge Larry C. Zervos
agreed that the Pierces damages claim was frivolous.
Catalina moved for attorneys fees and costs under
Alaska Civil Rule 68. The court looked first to Magnuson-Moss,
which states:
If a consumer finally prevails in any action
brought under . . . this subsection, he may
be allowed by the court to recover as part of
the judgment a sum equal to the aggregate
amount of cost and expenses (including
attorneys fees based on actual time expended)
determined by the court to have been
reasonably incurred by the plaintiff for or
in connection with the commencement and
prosecution of such action . . . .[10]
The court determined that Catalina, as a manufacturer and not a
consumer, was not entitled to attorneys fees and costs. The
court also declared that the underlying policy goals of Magnuson-
Moss do not support allowing defendants to recover attorneys fees
because allowing a fee award to a manufacturer would run counter
to the Acts purpose of encouraging consumers to pursue legal
action to protect their rights under a warranty. The court
therefore refused to award Catalina post-offer fees.
The court awarded the Pierces fees and costs of
$20,000. When added to interest ($10,460.76) and the jurys
original award ($12,445), this resulted in a total judgment of
$42,905.76.11
Catalina filed a motion for reconsideration, arguing
that it was seeking fees not under Magnuson-Moss but under Alaska
Civil Rules 68 and 82, that the language of Rule 68 is mandatory,
and that Rule 68 and Magnuson-Moss are not incompatible. The
superior court denied Catalinas motion, concluding that the
federal statute, federal preemption and the reasoning of the
majority of courts faced with this issue leave no room to award
fees to Catalina.
Catalina appeals the superior courts decision.
III. DISCUSSION
A. Standard of Review
Whether Rule 68 applies in a given case is a question
of law.12 Whether a federal statute preempts a state court rule
is also a question of law.13 We review questions of law de novo,
adopting the rule of law most persuasive in light of precedent,
reason, and policy.14
B. Rule 68 Applies in This Case.
Catalina moved for attorneys fees and costs under
Alaska Rule of Civil Procedure 68(b) (applicable to cases filed
before August 7, 1997), which provided in relevant part:
If the judgment finally rendered by the court
is not more favorable to the offeree than the
offer, the prejudgment interest accrued up to
the date judgment is entered shall be
adjusted as follows: (1) if the offeree is
the party making the claim, the interest rate
will be reduced by the amount specified in AS
09.30.065 and the offeree must pay the costs
and attorneys fees incurred after the making
of the offer (as would be calculated under
Civil Rules 79 and 82 if the offeror were the
prevailing party). The offeree may not be
awarded costs or attorneys fees incurred
after the making of the offer.
Catalina would not be eligible for fees under Alaska Civil Rule
82, which gives way to a specific statutory scheme for attorneys
fees like that in Magnuson-Moss.15 Rule 68s reference to Rule 82,
however, does not prevent a fee award. Rule 68 refers to Rule 82
only for the purpose of calculating the amount of the award. The
operative language of Rule 68 is mandatory, providing that the
offeree must pay the costs and attorneys fees incurred after the
making of the offer. It does not condition this requirement on
the offerees qualification for an award under any other rule.
The superior court found that the attorneys fee
provisions of Magnuson-Moss conflict with Rule 68. Under the
courts reasoning, the Supremacy Clause of the federal
constitution16 thus required that Magnuson-Moss preempt Rule 68,
leaving the court with authority to award fees only to the
Pierces, not to Catalina. Federal law preempts [a] state [court
rule] if Congress expressly or implicitly declares the state
[rule] preempted or if the state [rule] conflicts with the
federal law to the extent that (a) it is impossible to comply
simultaneously with both or (b) the state [rule] obstructs the
execution of the purpose of the federal [law].17 Magnuson-Moss
contains no express preemption of state court rules governing
attorneys fee awards.18 We therefore turn to the question whether
it conflicts with Alaska Civil Rule 68.
1. There is no direct conflict between Rule 68 and
Magnuson-Moss.
Magnuson-Moss authorizes awards of attorneys fees only
to prevailing consumers.19 In a warranty action, the consumer
will generally, if not always, be the plaintiff; the attorneys
fee provision does not mention prevailing defendants or parties
who do not prevail at trial. Civil Rule 68, on the other hand,
allows attorneys fees to defendants who do not prevail at trial.
Two provisions are in direct conflict when they cannot both be
followed when complying with one necessarily means violating the
other.20 If Magnuson-Moss, by authorizing awards only to
consumers, bars fee awards to defendants, then Rule 68 cannot be
followed without violating the federal law. But the Acts failure
to authorize awards to defendants is not the same as a bar on
such awards when they are allowed by another authority. This
silence distinguishes Magnuson-Moss from other federal laws that
place limits on the circumstances in which defendants can receive
fee awards and that therefore may conflict with state fee
provisions. For example, in State v. Goldens Concrete Co., the
Colorado Supreme Court found a conflict between a state law
mandating fee awards to defendants when the case against them is
dismissed before trial and 42 U.S.C. 1988, which allows fee
awards to defendants only when the plaintiffs suit was vexatious,
frivolous, or was brought to harass or embarrass the defendant. 21
Magnuson-Moss does not authorize awards to defendants, but
neither does it limit them as 1988 does.
A state court rule is presumed valid in the face of a
potentially conflicting federal law.22 In light of this
principle, we do not read Magnuson-Mosss silence as a bar on
awards to defendants. Therefore, it is possible to follow both
the state rule and the federal act without violating either. A
court could, as the superior court did after the first trial,
award the prevailing plaintiff full fees and costs, then offset
that award against the defendants post-offer fees and costs while
also giving the defendant the other benefit of Rule 68, a reduced
pre-judgment interest rate. There is no direct conflict between
Magnuson-Moss and Rule 68.
2. Rule 68 does not obstruct achievement of the
purpose of Magnuson-Moss.
The harder question is whether following Rule 68 would
obstruct the execution of the federal policy embodied in the
Magnuson-Moss attorneys fee provisions. The federal policy is to
encourage consumers with meritorious claims to bring them, even
when a plaintiffs recovery would not cover the attorneys fees
incurred.23 Under Rule 68, those plaintiffs may end up obliged to
pay part of their adversaries fees if they turn down an offer of
judgment. If this possibility is sufficient to discourage
plaintiffs from bringing suits, then following Rule 68 would
obstruct achievement of the purposes of Magnuson-Moss.
The United States Supreme Courts decision in Marek v.
Chesny24 makes clear that this conflict does not exist. When a
plaintiff rejects an offer of judgment larger than her eventual
trial recovery, the federal version of Rule 68 allows post-offer
costs to the defendant and bars the plaintiff from recovering
such costs.25 In Marek, the Supreme Court had to decide whether a
plaintiff who was barred by the federal Rule 68 from recovering
post-offer costs could still receive the full attorneys fees he
was allowed under 42 U.S.C 1988, the fee provision of the
substantive statute underlying the suit.26 It therefore had to
determine whether the rules term costs encompassed attorneys
fees. The Court determined that as long as the substantive
statute underlying the suit includes attorneys fees in its
definition of costs, then the federal Rule 68 does as well.27 The
plaintiff was thus denied fees that he would have recovered under
1988.
The Supreme Court then faced the question whether its
reading of the rule to include attorneys fees in some
circumstances would frustrate Congress[s] objective . . . of
ensuring that civil rights plaintiffs obtain effective access to
the judicial process through 1988, which allows attorneys fees
to prevailing civil rights plaintiffs.28 The question in Marek is
closely analogous to the question at the heart of our preemption
analysis in the present case. The Marek Court asked whether
federal Rule 68, by cutting back on plaintiffs fee awards,
undermines and conflicts with 1988, which allows full fees. We
ask whether Alaskas Rule 68, by forcing a prevailing plaintiff to
pay a defendants post-offer fees, undermines Magnuson-Moss, which
allows fees only to plaintiffs.
The Supreme Court in Marek concluded that there is no
conflict between federal Rule 68 and 1988: [W]e are not
persuaded that shifting the postoffer costs to [the plaintiff] in
these circumstances would in any sense thwart its intent under
1988 . . . . Section 1988 encourages plaintiffs to bring
meritorious civil rights suits; Rule 68 simply encourages
settlements. There is nothing incompatible in these two
objectives.29
Following the Supreme Courts reasoning, we hold that
there is no conflict between Alaska Civil Rule 68 and Magnuson-
Moss. Forcing plaintiffs to bear their own costs, as in Marek,
and requiring them to pay the other partys fees, as in the case
before us, have the same general effect reducing the benefit
that the underlying statute would give the plaintiffs. This
reduction could conflict with the underlying statutes goal in the
following scenario: Injured persons might be encouraged to bring
a claim by the prospect of a fee award provided by the underlying
statute. But they might then consider that if they reject an
offer, go to trial, and win less than the offer, Rule 68 will
reduce their award. The attorneys fee provision that had
encouraged them to file suit looks somewhat less appealing. This
might convince them not to bring their meritorious claim,
defeating the purpose of the fee provision.
This response seems unlikely, however. Marek holds
that leaving plaintiffs responsible for their own costs does not
reduce their incentive to bring suit to the extent that it
defeats the fee provisions purpose and creates a conflict. And
there is no suggestion that requiring prevailing plaintiffs to
pay the defendants post-offer, non-fee costs undermines Magnuson-
Moss. Requiring the plaintiff to pay the defendants post-offer
fees is not so much more onerous that it should be treated
differently. While it does reduce the incentive provided by
Magnuson-Moss, applying Rule 68 does not go so far as to defeat
its purposes. The two provisions are not in conflict.
Our decision in Turner v. Alaska Communications Systems
Long Distance, Inc.30 is not to the contrary. In Turner, we held
that absent class members with relatively small claims who remain
passive throughout the litigation are not liable for their
adversarys attorneys fees under Alaska Rule of Civil Procedure 82
if the class loses. We reasoned that the threat of such
liability would discourage absent class members from pursuing the
action and lead them to opt out, leaving them without a remedy.31
In light of Turners concerns, we must be careful about allowing
fee-shifting provisions to undercut provisions meant to encourage
plaintiffs to bring meritorious claims. But while we held in
Turner that absent class members are not liable for attorneys
fees if the class loses, we clarified that our decision did not
prevent the award of attorneys fees against the named class
representatives: [O]ur ruling does not eliminate Rule 82
attorneys fees in class actions; it simply limits Rule 82s
possible reach to named parties, meaning that a [defendant] who
has been forced to litigate in order to secure his or her rights
will be reimbursed in part for litigation expenses.32 Thus, the
dissents pronounced reliance on Turner to resolve the question in
this case is misplaced.
Rule 68 therefore applies in this case. The superior
court calculated the amount of the Pierces judgment following the
first trial, first for the purpose of comparing it to Catalinas
offer and then under Rule 68 in order to determine the final
amount they were owed. At the second trial, the jury awarded no
new damages, so its basic award was not increased. And because
the Pierces were thus not prevailing parties, they can get no
further fees or costs under Magnuson-Moss. Assuming that the
superior courts calculations were correct at the outset,
Catalinas offer is still larger than the Pierces award and the
superior courts calculation of the value of the Pierces award
under the Rule 68 formula remains accurate. The superior court
must still determine the fees and costs incurred by Catalina
since the original calculation following the first trial and then
recalculate the offset between the parties awards.
IV. CONCLUSION
For the foregoing reasons, we REVERSE the superior
courts decision not to apply Alaska Civil Rule 68 and the
judgment that followed, and REMAND for proceedings consistent
with this opinion.
BRYNER, Justice, dissenting.
I disagree with this opinion and would affirm the
superior courts ruling on fees. I would reach this conclusion
under our own civil rules, without deciding the issue of federal
preemption.
As I read them, Civil Rules 68 and 82 would not support
an award of fees to Catalina. Civil Rule 68 expressly required
Catalinas post-offer fees to be determined by looking to the fees
that Catalina would have recovered under Rule 82 if it had
prevailed in this action: [I]f the offeree is the party making
the claim, . . . the offeree must pay the costs and attorneys
fees incurred after the making of the offer (as would be
calculated under Civil Rules 79 and 82 if the offeror were the
prevailing party).1 If Catalina had prevailed against the
Pierces, Rule 82 would have precluded it from recovering any
prevailing-party fees. Specifically, Rule 82(a) provides: Except
as otherwise provided by law or agreed to by the parties, the
prevailing party in a civil case shall be awarded attorneys fees
calculated under this rule.2 Here, the issue of prevailing-party
fees is in fact otherwise provided by law: the Magnuson-Moss Act
does not permit fee awards to prevailing defendants, expressly
providing for awards only to a prevailing consumer.3 Since Rule
82(a) gives controlling effect to the Magnuson-Moss Acts fee
provision and Rule 68 expressly limits post-offer fees to those
that would be calculated under Civil Rule[] . . . 82 if the
offeror were the prevailing party,4 Catalina has no right to
recover post-offer fees under Rule 68.
Todays opinion reaches the contrary conclusion by
reading Rule 68(b)(1) as if it referred only to the mechanical
process of calculating the amount of fees, as set out in Rule
82(b). But this interpretation is textually implausible. If
Rule 68(b)(1) had simply been intended to direct how the amount
of the offerors award should be determined, then it could easily
have pointed specifically to Civil Rule 82(b), which expressly
deals with the Amount of Award[s] made under that rule.5 Instead
Rule 68(b)(1) was phrased broadly to require that fees be
calculated under Rule 82. This broad reference to Rule 82 in its
entirety encompasses subsection 82(a). By referring to fees
calculated under Rule 82, moreover, Rule 68(b)(1) similarly
points beyond Rule 82(b)s Amount of Awards provision, since Rule
82(a) is the only subsection of Rule 82 that uses the word
calculated.
The opinions narrow reading of Rule 68(b)(1) suffers
from logical as well as textual problems. By reading Rule
68(b)(1) to be mandatory and interpreting it to completely
exclude Rule 82(a)s otherwise provided exception, the opinion
necessarily suggests the improbable conclusion that the offer-of-
judgment rule must6 prevail over all exceptions set out in Rule
82(a) that it would prevail, for example, even over a freely
negotiated contract to waive recovery under the offer-of-judgment
rule (an agreement that would otherwise fall within Rule 82(a)s
exception for provisions otherwise . . . agreed to by the
parties, which the opinion finds irrelevant for purposes of
applying Rule 68(b)(1)).7
By contrast, interpreting Rule 68(b)(1)s reference to
Rule 82 as one that encompasses all provisions of Rule 82 offers
the advantages of being textually faithful to Rule 68s language
and logically sound. By looking to the underlying cause of
action to determine whether Rule 68 requires the offeree to pay
fees, this interpretation aligns Alaskas offer-of-judgment
provision with the approach adopted by the United States Supreme
Court in Marek v. Chesny8 and numerous federal cases interpreting
Marek.9 Wright and Miller approvingly describes the prevailing
federal approach adopted in Marek as follows:
[T]he Supreme Court was careful to specify in
Marek that only properly awardable costs were
to be awarded to defendants, and the lower
courts have properly held that this means
that civil-rights defendants can recover
their fees as a part of costs under Rule 68
only if they can satisfy the otherwise-
applicable standard for recovery by
defendants.[10]
Interpreting Rule 68 to embody this approach seems
especially appropriate from a historical perspective: Rule
68(b)(1)s language requiring an offerors fees to be awarded as
would be calculated under Civil Rule[] . . . 82 if the offeror
were the prevailing party was added to Rule 68 in 1987, soon
after Marek was decided. The timing of this amendment suggests
that it meant to follow Mareks approach of determining the
offerors entitlement to attorneys fees by looking to the statute
governing the underlying cause of action. This interpretation
similarly comports with our own case law in analogous situations,
which has consistently recognized that specific fee provisions in
statutes creating substantive causes of action ordinarily
supersede the general provisions of Rule 82.11 Further, as I
explain below, this interpretation also advances the Magnuson-
Moss Acts primary goal of encouraging consumers to pursue small
warranty claims, thus avoiding the troubling federal preemption
problems caused by the opinions narrow reading of Rule 68.
For all these reasons, I would conclude that, because
Rule 82(a) would bar Catalina from recovering prevailing-party
fees if it prevailed in this action, Rule 68(b)(1) did not
entitle Catalina to an award of post-offer fees. While this
reading of Rule 68 would make it unnecessary to resolve the
question of federal preemption, the opinions resolution of that
issue requires me to address the point.
Initially, as to the first prong of the federal
preemption test, I disagree with the opinions premise that the
Magnuson-Moss Acts failure to award fees to defendants amounts to
silence on the issue of a defendants right to prevailing-party
fees, and so distinguishes Magnuson-Moss from other federal laws
that place limits on the circumstances in which defendants can
receive fee awards and that therefore may conflict with state fee
provisions.12 After all, Magnuson-Moss is hardly silent on the
issue of prevailing-party fees. Unlike the Civil Rights Acts
language at issue in Marek, the Magnuson-Moss Acts language
expressly allows prevailing-party fees to be awarded only to a
claimant.13 Since federal law has no general prevailing-party
fee rule comparable to Rule 82, Magnuson-Mosss authorization of
fees only to claimants effectively precludes fee awards to
defendants completely. By comparison, the statutory language
considered in Marek only partly precluded fee awards to
defendants, expressly allowing fees to be awarded against
plaintiffs in frivolous cases. I fail to see how the Magnuson-
Moss Acts express language eliminating all circumstances in which
defendants may recover fees can realistically be viewed as
creating less conflict with the opinions reading of Rule 68 than
the Civil Rights Acts language, which merely eliminates some
circumstances.
But even if the first prong of the opinions preemption
analysis were correct, its second-prong analysis would remain
problematic. The opinion concludes that its interpretation of
Rule 68 does not obstruct the Magnuson-Moss Acts purpose. In
reaching this conclusion, the opinion leans heavily on Marek,
declaring that case to be closely analogous.14
Yet as the opinion itself acknowledges, the issue
addressed in Marek is readily distinguishable from the one
presented here:
The Marek Court asked whether federal Rule
68, by cutting back on plaintiffs fee awards,
undermines and conflicts with 1988, which
allows full fees. We ask whether Alaskas
Rule 68, by forcing a prevailing plaintiff to
pay a defendants post-offer fees, undermines
Magnuson-Moss, which allows fees only to
plaintiffs.[15]
The opinion nonetheless dismisses this distinction as
insignificant, summarily observing that [f]orcing plaintiffs to
bear their own costs, as in Marek, and requiring them to pay the
other partys fees, as in the case before us, have the same
general effect reducing the benefit that the underlying statute
would give the plaintiffs.16 Yet this observation begs the
critical question: does this general sameness of effect mask
specific distinctions that make a practical difference? It seems
to me that the answer is yes.
It may be true at some abstract level that requiring
Magnuson-Moss claimants to bear their own costs would have the
same general effect as requiring them to pay defendants post-
offer fees. There is in fact a vast functional difference
between limiting how much a claimant can recover upon winning a
judgment against the defendant and exposing the claimant to a new
risk of having to pay a judgment in the defendants favor even if
the claimant prevails on the merits. The former can accurately
be seen as reducing the benefit. But surely the latter cannot:
it amounts instead to an affirmative detriment, and a substantial
one at that, achieving its effect not by reducing something that
the claimant would otherwise get but by exposing claimants to a
new form of economic hardship and pain. And in the small-damages
universe of consumer warranty actions, this threat of a new
liability will make worlds of difference. Although it
fleetingly acknowledges the Magnuson-Moss Acts primary goal of
encouraging consumers to pursue small warranty claims that would
otherwise be precluded by high litigation costs,17 the opinion
ignores the disproportionate impact of imposing new liability on
such risk-averse claimants, as well as the consequent danger of
discouraging meritorious claims. We recently recognized this
danger in Turner v. Alaska Communications Systems Long Distance,
Inc., where we described the consequences of holding absent
plaintiffs in small consumer class actions responsible for the
defendants prevailing-party fees, emphasizing the very real risk
of deterring legitimate claims:
A rule that permits the imposition of
attorneys fees on absent class members who
stand to gain such small monetary
compensation will encourage opt-outs and have
a chilling effect on this important use of
the class action device. As a result, some
class members with legitimate claims will be
left without a remedy.[18]
I find it hard to square our recent sighting of this
danger in Turner with the courts perception that its ruling in
the present case will cause no damage to the incentives offered
by Magnuson-Moss. The court tries to distance todays opinion
from Turner by observing that the fee exemption in Turner only
extended to absent class members and did not eliminate fee
liability for named parties.19 But this observation misses the
point of our ruling in Turner and misperceives its relevance
here.
As the court itself recognizes in todays opinion,
Turner stands for the proposition that fee-shifting poses a
significant risk of discouraging potential claimants with
meritorious small claims and should thus be avoided when it would
undercut a policy or law that is meant to encourage plaintiffs to
bring meritorious claims.20 In Turner, we found a strong public
policy encouraging broad participation in class actions; to avoid
hampering this policy by frightening potential class members out
of pending class actions, we exempted passive class members from
potential Rule 82 fees. But this policy of encouraging broad
class participation only applies to class actions actually filed;
it does not more broadly strive to encourage the filing of new
class-action claims. And its limited goal of broadening
participation in existing class actions would hardly be served by
a fee exemption covering plaintiffs who are already actively
participating in the action. Considering the specific policy at
issue in Turner, then, refusing to exempt named class
representatives from the requirements of Rule 82 made perfect
sense.
But here, in contrast to Turner, the policy at issue
does actively seek to encourage new claims: specifically, the
Magnuson-Moss Act is designed to encourage the filing of small
consumer warranty actions, and it strives to attain this goal by
creating a one-sided fee-shifting provision that favors the
claimant. In this setting, then, the proposition we recognized
in Turner that fee-shifting must be avoided when it undercuts a
provision meant to encourage new claims yields the opposite
result: applying Rule 68 in cases like this will directly erode
Magnuson-Mosss goal of encouraging otherwise reluctant consumers
to bring meritorious warranty claims. Indeed, the chilling
effect we sought to avoid in the class-action setting of Turner
can only increase in the setting of individual consumer claims,
where the added risk of new liability for opposing-party fees
cannot be spread to other class members.
As other courts have recognized, studies suggest that
individuals who have small claims are unusually vulnerable to
this kind of chilling effect, particularly when litigation costs
might exceed the size of their claims.21 This point is
particularly important in light of the Magnuson-Moss Acts
central purpose: to promote new claims by eliminating the effects
of high litigation costs on litigants whose individual claims are
too insignificant to command representation by counsel or to
warrant all the other expenses of invoking the judicial
process.22
Todays opinion threatens to defeat this purpose
completely. Although it nominally affects only those Magnuson-
Moss claimants who decline reasonable settlement offers, the
opinions actual effects will extend much farther. As the opinion
interprets Rule 68, it will regularly expose prospective Magnuson-
Moss claimants to a predictable and substantial risk of sizable
new litigation costs for defendants post-offer fees. In
practical terms, this will send a mixed message to all potential
claimants those with strong and weak claims alike: it will tell
them that the Magnuson-Moss Act lets them file their claims
freely; but at the same time it will put them on notice that they
should be prepared to accept the first offer of judgment
advanced, or face new litigation costs that might make their
claims far less than worthless. Faced with a near-certain
prospect of early and low offers, most consumers with potentially
meritorious small-damages-claims will simply give up without
bothering to file, concluding that the potentially high costs of
securing a reasonable judgment are simply not worth the
prohibitive risk.23
In my view, then, the opinions reading of Rule 68
conflicts with the Magnuson-Moss Acts primary goal and so runs
aground on federal preemption. The need to avoid this conflict
with federal law provides another good reason for interpreting
Rule 68(b)(1) as precluding defendants from recovering post-offer
fees unless Rule 82(a) would allow them an award as prevailing
parties.
_______________________________
1 2 P.3d 618, 620 (Alaska 2000).
2 Id.
3 15 U.S.C. 2312 (1998).
4 Pierce, 2 P.3d at 625.
5 Id. at 620.
6 602 P.2d 266, 269-70 n.4 (Alaska 1979).
7 15 U.S.C. 2310(d)(2) (1998).
8 See Alaska R. Civ. P. 68 (applicable to cases filed
before August 7, 1997).
9 Pierce, 2 P.3d at 625-27.
10 15 U.S.C. 2310(d)(2) (1998).
11 Because the superior court determined that Rule 68 did
not apply, it did not use the Farnsworth formula for comparing
the offer and the Pierces judgment.
12 Van Deusen v. Seavey, 53 P.3d 596, 603 (Alaska 2002).
13 Tlingit-Haida Regl Elec. Auth. v. State, 15 P.3d 754,
761 (Alaska 2001); Andrews v. Alaska Operating Engrs-Employers
Training Trust Fund, 871 P.2d 1142, 1143-44 (Alaska 1994).
14 Kodiak Island Borough v. Roe, 63 P.3d 1009, 1012 n.6
(Alaska 2003) (citing Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska
1979)).
15 Enders v. Parker, 66 P.3d 11, 17 (Alaska 2003) (Rule 82
provides for an award of attorneys fees to the prevailing party
[e]xcept as otherwise provided by law. ) (quoting Alaska R. Civ.
P. 82(a)).
16 U.S. Const. art. VI.
17 Interior Regl Hous. Auth. v. James, 989 P.2d 145, 149
(Alaska 1999) (quotation marks omitted).
18 Magnuson-Mosss guidance on its effect on other laws is
contained in 15 U.S.C. 2311, whose only preemptive provision
overrides certain state warranty laws. 15 U.S.C. 2311(c).
19 15 U.S.C. 2310(d)(2) (1998).
20 Webster v. Bechtel, Inc., 621 P.2d 890, 901 (Alaska
1980).
21 962 P.2d 919, 926 (Colo. 1998) (quoting Hensley v.
Eckerhart, 461 U.S. 424, 429 n.2 (1983)) (emphasis added); see
also Garan, Inc. v. M/V Aivik, 907 F. Supp. 397, 399 (S.D. Fla.
1995) (finding conflict between federal maritime law and state
offer of judgment statute because under federal maritime law
absent specific federal statutory authorization for an award of
attorneys fees, the prevailing party is generally not entitled to
those fees). But see Moran v. City of Lakeland, 694 So. 2d 886,
887 (Fla. Dist. App. 1997) (finding conflict between state offer
of judgment statute and federal law where federal statute
authorized fee awards for defendants in actions brought in bad
faith without expressly limiting them to such actions).
22 See Johnson v. Fankell, 520 U.S. 911, 918 (1997).
23 See State Farm Fire & Cas. Co. v. Miller Elec. Co., 596
N.E.2d 169, 171 (Ill. App. 1992); Ventura v. Ford Motor Corp.,
433 A.2d 801, 812 (N.J. Super. 1981).
24 473 U.S. 1 (1985).
25 Fed. R. Civ. P. 68.
26 473 U.S. at 3-4.
27 Id. at 9. Federal courts, perhaps responding to
concerns that defendants . . . found to have violated plaintiffs
rights would get fees from non-frivolous plaintiffs, 12 Charles
Alan Wright, et al., Federal Practice and Procedure 3006.2, at
131-32 (2d ed. 1997), interpret Marek to include fees in post-
offer cost awards only for defendants who would qualify for fees
under the suits substantive statute. See, e.g., Crossman v.
Marcoccio, 806 F.2d 329, 333-34 (1st Cir. 1986). This process of
looking to the underlying statute to determine whether costs
include attorneys fees is irrelevant in the present case.
Alaskas Rule 68 explicitly includes the award of attorneys fees
among the consequences of rejecting an offer that is greater than
the award obtained at trial. There is therefore no need to look
to the underlying statute to determine the definition of costs as
there was in Marek. We look to the underlying statute only to
determine whether it conflicts with Rule 68.
28 Marek, 473 U.S. at 10 (internal quotation marks and
citations omitted).
29 Id. at 10-11 (emphasis added); see also Clayton v.
Bryan, 753 So. 2d 632, 634-36 (Fla. Dist. App. 2000) (Harris, J.,
dissenting) ([T]here is nothing in the federal [Fair Debt
Collection Protection Act], nor is there a reason within the
policy behind the federal act, that would preclude a state from
requiring that all parties in litigation . . . realistically
evaluate their case . . . and to accept a settlement offer
commensurate with their claim.).
30 78 P.3d 264 (Alaska 2003).
31 Id. at 268.
32 Id. at 269.
1 Alaska R. Civ. P. 68(b)(1) (emphasis added) .
2 Alaska R. Civ. P. 82(a) (emphasis added).
3 15 U.S.C. 2310(d)(2) (1998).
4 Alaska R. Civ. P. 68(b)(1).
5 Alaska R. Civ. P. 82(b).
6 Alaska R. Civ. P 68(b)(1) (pre-August 7, 1997).
7 Alaska R. Civ. P. 82(a).
8 473 U.S. 1, 5 (1985).
9 See above, Slip Op. at 10, n.27.
10 12 Wright, Miller & Marcus, Federal Practice and
Procedure 3006.2, at 131 (1997) (internal footnotes omitted).
11 See, e.g., Enders v. Parker, 66 P.3d 11, 17 (Alaska
2003) (holding that personal representative in will contest
barred from claiming fees as prevailing party under Rule 82
because AS 13.16.435 expressly governs fee awards in such cases:
If a specific statutory scheme for attorneys fees exists, Civil
Rule 82 does not apply.); see also Moody-Herrera v. State, 967
P.2d 79, 90 (Alaska 1998) (holding that Rule 82 governed fee
award to prevailing defendant in action under Alaska Human Rights
Act because Act included no fee provision, but suggesting that
Rule 82 would be inapplicable if provision similar to federal
civil rights act fee provision had existed); cf. Crittell v.
Bingo, 83 P.3d 532, 536 (Alaska 2004) (allowing fee award under
Rule 82 in will contest when neither contestant could claim fees
as estate representative under AS 13.16.435); Bobich v. Hughes,
965 P.2d 1196, 1200 (Alaska 1998) (stating that statutory
attorneys fees provision awarding full fees ordinarily takes
precedence over Rule 82 provision awarding partial attorneys
fees); Whaley v. Alaska Workers Comp. Bd., 648 P.2d 955, 959
(Alaska 1982) (holding that prevailing employer could not obtain
attorneys fees because granting such fees would undermine
purposes of Alaska Workers Compensation Act and limit claimants
ability to seek appellate relief).
12 Slip Op. at 7.
13 15 U.S.C. 2310(d)(2) (1998).
14 Slip Op. at 10.
15 Slip Op. at 10.
16 Slip Op. at 11.
17 Slip Op. at 8-9.
18 78 P.3d 264, 268 (Alaska 2003).
19 Slip Op. at 12.
20 Id.
21 See, e.g., Covenant Mutual Ins. Co. v. Young, 179 Cal.
App. 3d 318, 326 n.9 (Cal. App. 2d Dist. 1986) (If the costs are
large in relation to the stakes they will be a more important
factor in the litigants decision making and whether and how these
costs are shifted will influence litigation behavior more
dramatically than in high stakes - low cost cases); see also
Rowe, Predicting the Effects of Attorney Fee Shifting, 47 Law and
Contemporary Problems 139, 147 (1984) (For the middle-income
litigant, to whom the risk of having to pay costs would be a
major deterrent, the difference between American and one-way
rules on the one hand, and the two-way approach with its threat
of substantial costs on the other, should be quite significant.).
22 Gorman v. Saf-T-Mate, Inc., 513 F. Supp. 1028, 1033 (D.
Ind. 1981).
23 Cf. Covenant Mutual Ins. Co., 179 Cal. App. 3d at 326
(Indeed it is entirely possible bilateral fee-shifting would lead
to fewer lawsuits and less effective enforcement than is
experienced in the absence of any fee-shifting at all. Injured
people contemplating a lawsuit would confront the prospect of
having to pay the defendants legal fees as well as their own in
the event they lost. This would make the bet even less appealing
. . . where the chances of winning are good but uncertain.).
