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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. 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.).