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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Pederson v. Barnes (07/21/2006) sp-6023

Pederson v. Barnes (07/21/2006) sp-6023, 139 P3d 552

     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

LAWRENCE A. PEDERSON and )
PAUL J. NANGLE, ) Supreme Court No. S- 11621
)
Appellants,)
) Superior Court No.
v. ) 4FA-01-1865 CI
)
BRIENNE BARNES and ) O P I N I O N
JAMES A. AIKEN, )
)
Appellees. ) [No. 6023 - July 21, 2006]
)
          Appeal  from the Superior Court of the  State
          of    Alaska,   Fourth   Judicial   District,
          Fairbanks, Mark Wood, Judge.

          Appearances:   R. N. Sutliff, Anchorage,  for
          Appellants.    Edmond  W.  Burke,   Burke   &
          Bauermeister,   P.L.L.C.,   Anchorage,    for
          Appellee Brienne Barnes.

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

          MATTHEWS, Justice.


I.   INTRODUCTION
          This case presents two new questions of law.  First, in
which circumstances is a guardians lawyer liable to the ward  for
the  guardians wrongdoing?  We adopt the Restatement standard and
conclude  that liability exists only if the lawyer  knew  or  had
reason to know of the wrongdoing.  Second, which liability regime
applies  in  duty-to-protect cases?   Based  on  the  legislative
history  behind  AS  09.17.900, we determine  that  pure  several
liability applies.
II.  FACTS AND PROCEEDINGS
     A.   Facts
          Brienne  Barness parents died in Fairbanks on  February
21,  1997,  when  her father killed her mother  and  then  killed
himself.   Barnes was eleven years old at the time.  James  Aiken
was  Barness  maternal uncle, and was the mothers only  immediate
adult  relative.  Aiken promptly traveled from San  Francisco  to
Fairbanks  and  contacted  Lawrence  Pederson,  an  attorney   in
Anchorage,  to  represent him in his petition to  become  Barness
guardian.
          On  February 28, 1997, a guardianship hearing was  held
in Fairbanks, presided over by Standing Master Alicemary Closuit,
who   approved  Aikens  appointment  as  guardian.    After   his
appointment,  Aiken  moved  from  San  Francisco  and  lived   in
Fairbanks with Barnes.  Approximately twenty-one months later, in
November  1998,  Barness therapist sent a letter  to  the  court,
which  found  its  way  to  Pederson.   In  the  letter,  Barness
therapist  said  that  there  were  indications  that  Aiken  was
spending   Barness  money  on  himself   e.g.,  that  Aiken   was
unemployed, that he had purchased a home in his name, and that he
was buying expensive medicines for himself and his pets.
          In  response to this letter, Pederson spoke  to  Aiken,
who  assured him that Barness money had been invested with a  San
Francisco  friend  of Aikens who was in the investment  business.
Aiken  provided  Pederson with financial  statements,  which  are
described  below.  Pederson had Aiken confirm that  the  investor
friend  was  a  certified investment person and was licensed  and
bonded.   However,  Pederson  never  attempted  to  contact   the
investment  company to verify that it existed  and  that  it  had
Barness  money.  Pederson also spoke to Joyce Parks, a  Fairbanks
real estate agent who had become close to Aiken in the course  of
helping  him  find  a house (and who eventually uncovered  Aikens
fraud  and  then  brought  this lawsuit against  both  Aiken  and
Pederson).   She  told Pederson that the therapist  was  a  loose
cannon  and was not to be trusted.  It also appears that Pederson
unsuccessfully attempted to talk to the therapist.
          On  December 9, 1998, Pederson filed a report with  the
court  on  Aikens  behalf, in which he attempted  to  refute  the
allegations  made by the therapist.  The report said  that  Aiken
was  receiving workers compensation plus $800 a month in what  is
effectively  child  support  and that  Medicaid  was  paying  his
medication  bills.   The report also listed  Barness  assets  and
tried  to  match  current assets up to the  original  sources  of
assets.    According  to  the  report,  Barnes  had   assets   of
approximately  $49,000, almost all of it invested in  trust  with
Heid  Investment  Company.  The sources  of  these  assets  were:
$33,000   in  crime  victim  compensation  and  Public   Employee
Retirement System benefits accrued by Barness mother;  two  years
worth  of  permanent fund dividends for Barnes;  and  $1,070  per
month  paid  to  Barnes  in social security  benefits.   Pederson
stated  in  the report that the $49,000 total did not  include  a
pending  payment of $34,000 from the state Supplemental  Benefits
System (SBS).
          Pederson  attached to the report what  appeared  to  be
account statements from an entity called Heid Investment Company.
These  reports showed two account statements on Heid  letterhead,
with  address,  telephone number, and HIC  logo.   One  statement
purported  to  be  a  Transaction Report for  Investment  Account
Number  57426113451 James A. Aiken in trust for  Brienne  Barnes.
It showed Deposits of $34,251.71, Losses of $7,371.77, Profits of
$17,472.53, and an Account Total of $44,352.47 as of November 15,
1998.   The  second statement was titled Transaction  Report  for
Money  Market Account Number 57426113451 James A. Aiken in  trust
for Brienne Barnes.  It showed Deposits on various dates totaling
$3,051, Interest to 11/15/98 of $381.37, and an Account Total  of
$3,432.37.  As would be pointed out later, after Aikens fraud was
discovered,  the money market account implied an incredibly  high
return for money market funds.
          On  December 10, 1998, Master Closuit held  a  hearing.
The only people present were Aiken and Pederson (who appeared  by
telephone).   Master Closuit seemed persuaded by the  December  9
report,  made Aiken affirm under oath that everything in  it  was
true,  and  said  she would recommend that Superior  Court  Judge
Charles  R.  Pengilly  approve the  report  and  continue  Aikens
guardianship.
          A week later, before Master Closuits recommendation was
approved by the superior court, Pederson, on Aikens behalf, filed
a  supplement to the report.  The supplement explained  that  the
December  9,  1998 report inadvertently omitted  one  account,  a
certificate of deposit worth $40,274.18 held through Heid.   With
the  CD,  Barness assets totaled $89,167.53, as  opposed  to  the
$49,000  shown  in  the  December  9  report.   Attached  to  the
supplement  was  the Heid account statement, which  purported  to
show  Interest  to  11/15/98 of $3,494.11 on the  certificate  of
deposit.   Again, the interest implies a remarkable return  on  a
certificate  of deposit of almost ten percent over  a  period  of
less than a year.
          On  Master  Closuits recommendation, and based  on  the
report,  the supplement and Mr. Aikens testimony, Judge  Pengilly
determined  that  the allegations in the therapists  letter  were
groundless and approved the continuation of the guardianship.
          By  the  summer  of  1999, Parks  had  apparently  lost
confidence  in  Aiken.  She petitioned to become a guardian,  and
eventually  became co-guardian with Aiken.  In October  1999  she
discovered  that  the Heid accounts did not  exist  and  informed
Pederson. Pederson then quickly discovered for himself that  Heid
Investment Company did not exist and that the phone number on the
account  statements  was fictitious.  He  promptly  informed  the
court.   Aiken  was eventually convicted of theft  in  the  first
degree,  after  it  was discovered that the  $111,000  in  estate
assets had been reduced to less than $200.
     B.  Proceedings
          Joyce  Parks, as guardian for Barnes, filed  a  lawsuit
against  Aiken,  Pederson, and Paul J. Nangle,  another  attorney
associated with Pederson.1  In the count directed at Pederson and
Nangle, the complaint alleged that Pederson had a duty to  Barnes
to  use  due care to determine and ensure that [her] assets  were
not  placed  in  jeopardy, and that his violation  of  this  duty
constituted  negligence  and malpractice.   Pederson  and  Nangle
moved  for summary judgment, in part based on Pedersons  argument
that  he  had not had actual knowledge of Aikens wrongdoing,  and
that absent this knowledge he could not have breached any duty he
might  have  owed to Barnes. Barnes opposed the  motion  with  an
affidavit from Bruce Gagnon, an Anchorage attorney, opining  that
Pederson  knew  or had reason to know of Aikens fraud,  based  in
part  on  the  high  returns shown in the Heid  statements.   The
superior  court denied Pedersons motion.  Relying on  Fickett  v.
Superior  Court  of  Pima County,2 the court held  that  Pederson
could  be  liable if he knew or should have known of  the  fraud.
The  superior court concluded that there was at least a  question
of  fact  as  to  whether Pederson knew or should have  known  of
Aikens fraud.
          The  case  was then tried to a jury.  At the  close  of
Barness  case,  Pederson and Nangle moved for a directed  verdict
absolving them of liability for punitive damages; this motion was
denied.   They also moved for entry of judgment against Aiken  in
the approximate amount of $82,000, which was the amount Aiken had
been  ordered to pay as restitution in his criminal  case.   This
motion was not opposed by Barnes and was granted by the court.
           The  jury returned a special verdict finding  that  on
November  16, 1998 (the date the superior court (1) received  the
therapists  allegations that Aiken may have been  stealing  money
and  (2)  ordered  a  hearing  about the  allegations),  Pederson
breached his duty of care.  The jury awarded compensatory damages
of  $8,473.61 the amount of money found by the jury to have  been
stolen  from  Barnes after that date.  The jury also  found  that
Aiken  was  sixty  percent at fault and that Pederson  was  forty
percent at fault for the compensatory damages.  Finally, the jury
found  that  Pederson  should be liable for $37,500  in  punitive
damages,  and that Aiken should be liable for $75,000 in punitive
damages.   Pederson  and Nangle moved for a JNOV,  but  this  was
denied.
          Superior Court Judge Mark Wood then entered judgment on
these verdicts.  Judge Wood entered judgment against Pederson and
Nangle  jointly,  holding them liable for the full  $8,473.61  in
economic  loss that occurred after November 1998, notwithstanding
the  jurys allocation of sixty percent of the fault for that loss
to  Aiken. The court also entered judgment against them  for  the
$37,500 in punitive damages awarded against Pederson by the jury.
III. DISCUSSION
     A.   Pedersons Motion for Summary Judgment.
          
          In  order  to  be  liable  to Barnes  for  damages  she
suffered  as  a result of Aikens wrongdoing, Pederson  must  have
breached  a  legal duty that he owed to Barnes.3   When  Pederson
moved  for  summary judgment, he argued that  he  had  no  actual
knowledge of Aikens wrongdoing and that absent this knowledge  he
could  not  have breached any duty he might have owed to  Barnes.
The superior court concluded that Pederson, in his representation
of  Aiken  as Barnes guardian, owed a legal duty of care  to  not
adversely  affect  Barnes  interest in the  guardianship  estate.
Moreover,  the  superior  court determined  that  a  question  of
material  fact  existed about [w]hether Pederson knew  or  should
have known that Aiken was mismanaging or wasting the guardianship
estate.   As a result, the superior court denied Pederson summary
judgment.
          We  review  a  superior  court  order  denying  summary
judgment de novo.4  [I]f a genuine issue of material fact  exists
or  the moving party was not entitled to judgment as a matter  of
law we affirm the denial.5  A material issue of fact exists where
reasonable jurors could disagree on the resolution of  a  factual
issue.  Facts are to be viewed in the light most favorable to the
nonmoving party.6
          In  his appeal, Pederson argues that the superior court
applied  the wrong legal standard when determining the parameters
of  the  legal duty he owed to Barnes.  Pederson argues that  the
superior  court,  when considering Pedersons motion  for  summary
judgment,  should not have asked whether Pederson knew or  should
have  known of Aikens misconduct, but should instead have applied
the Restatement7 standard and asked just whether Pederson knew of
the  wrongdoing.  Because it is undisputed that Pederson  had  no
actual knowledge of Aikens wrongdoing, Pederson contends that  if
the  superior  court had applied the correct legal  standard,  it
could  not have found a question of material fact to exist  about
whether  Pederson had violated his duty to Barnes.  As a  result,
the  superior court would have had no choice but to grant summary
judgment to Pederson.
          We   agree  with  Pederson  that  section  51  of   the
Restatement (Third) of the Law Governing Lawyers articulates  the
correct  standard for determining the circumstances  in  which  a
guardians  lawyer owes a duty to the guardians ward.  Section  51
explains that
          a lawyer owes a duty to use care . . .
          
          . . .
          
          (4)  to  a  nonclient when and to the  extent
          that:
          
               (a) the lawyers client is
               a . . . guardian[;]
               
               (b) the lawyer knows that
               appropriate action by the
               lawyer is necessary  with
               respect   to   a   matter
               within  the scope of  the
               representation to prevent
               or  rectify the breach of
               a  fiduciary duty owed by
               the    client   to    the
               nonclient, where (i)  the
               breach  is  a  crime   or
               fraud  or (ii) the lawyer
               has   assisted   or    is
               assisting the breach;
               
               (c)  the nonclient is not
               reasonably    able     to
               protect its rights; and
               
               (d) such a duty would not
               significantly impair  the
               performance    of     the
               lawyers  obligations   to
               the client.[8]
               
          Pedersons argument that he owed no duty to Barnes under
Restatement  (Third) of the Law Governing Lawyers  section  51(4)
derives  from  his belief that he had insufficient  knowledge  of
Aikens   wrongdoing.   Knowledge  is  a  requirement  of  section
51(4)(b).  However, since Pederson argues that an application  of
the Restatement standard compels an award of summary judgment  in
his  favor,  it  behooves us to assess all  of  the  elements  of
section  51(4), not just section 51(4)(b).  If the facts  of  the
case  fail  to satisfy any one of the elements of section  51(4),
Pederson would have no legal duty to Barnes and could not be held
liable for damages.
          Beginning  our analysis with section 51(4)(a),  neither
side  contests the fact that Pedersons client, Aiken, was Barness
guardian.  It is also undisputed not only that Aiken committed  a
crime  when  he  stole  his nieces money,  as  evidenced  by  his
criminal  conviction, but also that his crime was facilitated  by
the  report  that Pederson drafted and submitted to the  superior
court  refuting allegations of Aikens wrongdoing.  As for section
51(4)(c),  according to the terms of the Restatement,  Barnes,  a
minor  at  the  time  that her uncle stole  her  money,  was  not
reasonably  able to protect her rights.9  Finally, while  neither
side  addresses  the issue, section 51(4)(d) is  also  satisfied,
since  it  does not appear that Pederson would have violated  his
obligations  to Aiken had he taken the action he ultimately  took
reporting Aikens wrongdoing to the court  sooner.10
          Since  all  of  the other requirements  of  Restatement
section  51(4) are satisfied, in order to assess whether Pederson
owed  a  duty  to  Barnes, all that remains to be  determined  is
whether  Pederson knew that he needed to take action  to  rectify
Aikens wrongdoing.  The Restatement defines know as having actual
knowledge  or,  alternatively, reason to know, which  is  further
defined  as  having information from which a person of reasonable
intelligence or of the superior intelligence of the  actor  would
infer  that the fact in question exists.11  The Restatement takes
care  to  distinguish reason to know from should know.12   Should
know denote[s] the fact that a person of reasonable prudence  and
intelligence or of the superior intelligence of the  actor  would
          ascertain the fact in question in the performance of his duty to
another,  or  would govern his conduct upon the  assumption  that
such  fact  exists.13  Reason to know is a less onerous  standard
than  should  know, because reason to know only involves  drawing
inferences from known facts, whereas should know entails  a  duty
to inquire and determine new facts.14
          Pederson reiterates several times in his briefs that he
had  no actual knowledge of Aikens wrongdoing.  At no point  does
he  address  whether  he had reason to know  of  Aikens  conduct.
Instead, Pederson analogizes his situation to that of the  lawyer
in  Illustration  6 to Restatement (Third) of the  Law  Governing
Lawyers  section  51.  In Illustration 6, a lawyer  represents  a
client  in  the clients capacity as a trustee.  The client  tells
the  lawyer that he is going to transfer trust funds into a trust
account,  but  what  the client is actually  planning  to  do  is
embezzle  the  funds by transferring them into his  own  account.
According to the illustration:
          [e]ven  though [L]awyer could have  exercised
          diligence  and  thereby  discovered  [Clients
          description of his plan] to be false,  Lawyer
          does not do so.  Lawyer is not liable to  the
          harmed  Beneficiary.   Lawyer  did  not   owe
          Beneficiary a duty to use care because Lawyer
          did  not know (although further investigation
          would  have revealed) that appropriate action
          was   necessary  to  prevent  a   breach   of
          fiduciary duty by Client.
          
          The  facts  of  this  case differ  from  the  facts  in
Illustration  6,  however.   The only information  known  by  the
lawyer in the illustration is that the client planned to transfer
trust  funds  into  a trust account.  There  is  nothing  at  all
suspicious  about such a course of action, so the lawyer  in  the
illustration  has no information from which to draw an  inference
that the client is planning to embezzle funds.  In this case,  by
contrast,  several  warning signs of Aikens  misconduct  existed.
Pederson knew about Barness therapists allegations that Aiken was
living  beyond  his means.  Moreover, Pederson had obtained  from
Aiken  three  financial  statements purportedly  issued  by  Heid
Investment  Company.  When opposing Pedersons motion for  summary
judgment,  Barnes submitted a summary of Attorney  Bruce  Gagnons
testimony.   In  the  summary, Gagnon opined  that  a  number  of
characteristics  of  the  Heid Investment  Company  reports  gave
Pederson  reason  to know that something was  amiss  with  Aikens
handling of guardianship funds. According to Gagnon, not only  do
the reports purport to come from an obscure financial institution
and suspiciously provide no details about how Barness assets were
being  invested, but they also indicate impossibly high rates  of
return  on  the  investments.  Moreover, Aiken,  in  his  initial
accounting to Pederson, failed to account for $40,274.18,  which,
when reported, almost doubled the amount of guardianship funds.
           Given this evidence about the suspicious appearance of
the  account statements, the incredibly high levels of return  on
the  investments,  and the fact that for a time Aiken  apparently
     forgot about half of the guardianship funds, we hold that  a
genuine issue of material fact existed about whether Pederson had
enough  information from which to infer, and thus had  reason  to
know,  that  Aiken  was  defrauding his  niece.   When  assessing
Pedersons  argument at the summary judgment stage that  he  could
not  have  breached a duty to Barnes, the superior  court  should
have  asked  whether Pederson had reason to know, not whether  he
should  have known, of Aikens misconduct.  Although the  superior
court   applied   an  erroneous  standard,  the  superior   court
nevertheless reached the correct result.  We therefore uphold the
denial of Pedersons motion for summary judgment.15
     B.   Pedersons Liability for the Compensatory Damage Award.
          
          The  jury  in  this case found Aiken sixty  percent  at
fault  and  Pederson forty percent at fault for  the  portion  of
Barness  loss  ($8,473.61) that occurred after Pederson  breached
his duty to her.  The court, when entering final judgment against
Pederson,  ordered  Pederson to pay the entire $8,473.61  amount.
Pederson  argues that the superior court erred when it  held  him
jointly  and severally liable with Aiken rather than apportioning
the damages between them according to their percentage of fault.
          Analysis   of   Pedersons  liability  for  compensatory
damages  requires interpretation of AS 09.17.080  and  09.17.900.
Because  statutory interpretation poses a question of  law,  this
court uses its independent judgment16 and adopts the rule of  law
that  is  most  persuasive  in light of  precedent,  reason,  and
policy.17  When interpreting a statute, the court looks to  three
factors:  the  language of the statute, the legislative  history,
and the legislative purpose behind the statute.18
          When  the  jurors in this case allocated fault  between
Aiken   and   Pederson,  they  acted  in   conformity   with   AS
09.17.080(a)(2), which requires the trier of fact to indicate the
percentage of total fault that is allocated to each defendant (as
well  as  to  others  defined in subsection .080(a).   Subsection
.080(d)  requires  the superior court to enter  judgment  against
each party liable on the basis of several liability in accordance
with that partys percentage of fault.19
          In 1997 the legislature amended the definition of fault
found in AS 09.17.900 to include intentional conduct.20  With this
amendment,  the  legislature made it clear that  it  intended  AS
09.17.080s several liability regime to extend to cases  involving
intentional conduct.21
          While  the  amended AS 09.17.900 and  .080,  when  read
together,  clearly extend pure several liability  to  intentional
torts,  the  statutes make no explicit mention of which  type  of
liability applies in duty-to-protect cases.  This court  held  in
Kodiak  Island Borough v. Roe that prior to 1997, torts  stemming
from  a  breach of the duty to protect were subject to joint  and
several  liability,  as described in the Restatement  (Third)  of
Torts: Apportionment of Liability section 14.22  While we declined
to  decide  the  issue  in  Kodiak, we suggested  that  the  1997
amendment  might have displaced the common law and  that  section
.900  may  now  permit  an  apportionment  that  is  contrary  to
Restatement (Third) of Torts: Apportionment of Liability  section
          14.23
          Superior Court Judge John Reese grappled with the issue
of  liability in a duty-to-protect case, Doe v. State of  Alaska,
Department  of Corrections.24  In an order resolving motions  for
summary  judgment  and  rule of law,  Judge  Reese  decided  that
because the legislature did not expressly consider tortfeasors in
duty to protect cases, and because including intentional acts  in
duty  to  protect cases undermines established policy  in  Alaska
case  law,  AS 09.17.080 and .900 were ambiguous when applied  to
duty-to-protect cases.25  Judge Reese concluded that because  the
duty  of  care . . . would effectively be nullified if the  party
entrusted with the duty to protect was permitted to allocate, and
effectively  shift,  the  fault  to  the  subsequent  intentional
tortfeasor,26 if Doe proved that the state had violated its  duty
of  care, then the state and the intentional tortfeasor would  be
jointly and severally liable.27  The superior court in this  case
relied  upon  Judge Reeses decision in Doe when  it  declined  to
allocate fault between Aiken and Pederson.
          Pederson argues that the superior court should not have
relied upon Judge Reeses decision because he, unlike the state in
the  Doe case, had no duty to protect.  We have already concluded
that so long as he had reason to know of Aikens crime or fraud,28
Pederson did have a duty to take appropriate action to prevent or
rectify it,29 a duty the jury found Pederson to have breached.  We
therefore conclude that Pederson is liable to Barnes based  on  a
failure to protect [her] from the specific risk of an intentional
tort,30  satisfying the Restatements description  of  a  duty  to
protect.
          Pederson  argues  in  the  alternative  that  the  pure
several liability regime created by AS 09.17.080 and .900 extends
to  duty-to-protect  cases.  We agree with  Pederson  that  as  a
result  of  the  1997 amendment to AS 09.17.900,  duty-to-protect
cases are now subject to the pure several liability regime of  AS
09.17.080.  While Judge Reese was correct that AS 09.17.900  does
not  specifically address duty-to-protect cases, the  legislative
history indicates that the legislature considered and intended to
include  duty-to-protect cases in its amendment of AS  09.17.900.
When  the  Governors Advisory Task Force on Civil Justice  Reform
proposed amending AS 09.17.900, it chose to illustrate the effect
of the new language with an example of a duty-to-protect case:
          [P]laintiffs  sometimes  sue  the  State  for
          negligent  supervision of a  probationer  who
          intentionally  shoots  the  plaintiff.    The
          plaintiff may fail to name the probationer as
          a defendant and attempt to allocate all fault
          to  the State.  This amendment clarifies  the
          States  right  to name the probationer  as  a
          third-party  defendant  and  to  have   fault
          allocated against him or her for his  or  her
          intentional    acts.    This    avoids    the
          incongruous  result  of allocating  fault  to
          those who are negligent, but not to those who
          act intentionally.[31]
          
When  the  task  forces proposed amendment was presented  to  the
legislature, the house majority leaders sectional summary  stated
that  the  amendment was taken verbatim from the  Report  of  the
Governors Task Force.32
          Given the facts that the plain language of AS 09.17.900
makes  no  exception for the duty to protect, that the  Governors
Advisory  Task  Force on Civil Justice Reform indicated  that  it
intended the amended statute to reach duty-to-protect cases,  and
that  the  legislature incorporated by reference the task  forces
duty-to-protect example, we conclude that pure several  liability
applies  in  duty-to-protect cases.  As a  result,  the  superior
court  erred when it failed to apportion damages between Pederson
and Aiken.
          A   determination  that  Pederson  can  only  be   held
severally  liable does not end our inquiry into the exact  amount
of  Pedersons  liability, however.  Pederson argues that  because
Aiken  as  part  of his criminal conviction was  ordered  to  pay
Barnes  restitution and because the superior court in  the  civil
case  issued a directed verdict against Aiken for the full amount
of  Barness  loss,  entering judgment against  Pederson  for  any
amount   of   Barness  loss  has  the  effect  of   holding   him
impermissibly jointly and severally liable with Aiken.
          We  need  not resolve in this case whether the  $82,000
judgment against Aiken for the full amount of Barness loss, which
includes  the $8,473.61 that was due in part to Pedersons  breach
of  duty,  could result in an offset that would be  to  Pedersons
benefit.33   For  resolution of this issue to be required,  Aiken
would  need  to  have  paid  a  sum which,  taken  together  with
Pedersons  liability, would result in Barnes receiving a  partial
double  recovery.34   Since Aiken had only  paid  $2,640  of  the
judgment  against  him as of July 2004, the  most  recent  figure
available  in  the record, it appears that this triggering  event
has not taken place.
          Pederson also might be arguing that the superior court,
when  it  granted the directed verdict for the full loss  against
Aiken,  impliedly held that Pederson was innocent of  wrongdoing.
Since  the  superior court (1) believed that  joint  rather  than
several liability applied to the case; (2) submitted the issue of
Pedersons  fault  to the jury; and (3) entered  judgment  against
Pederson,  the  superior court clearly did  not  intend  for  its
judgment  against  Aiken to indicate that Pederson  had  done  no
wrong.
          Because  we conclude that Pederson is severally  liable
for  the forty percent of fault allocated to him by the jury,  we
vacate the superior courts entry of judgment against Pederson and
remand  so  that the court can enter judgment in  the  amount  of
forty percent of the loss Barnes incurred after Pederson breached
his duty to her.
     C.   Pedersons Motion for a Directed Verdict on the Issue of
          Punitive Damages.
          
          At  the  close of Barness case, Pederson  moved  for  a
directed  verdict on the issue of punitive damages.  The superior
court  denied  the  motion  in part and  permitted  the  jury  to
determine whether Pederson was liable for punitive damages  after
          November 12, 1998.35  The jury subsequently awarded Barnes $37,500
in  punitive damages against Pederson, an amount which the  court
included  in  its final judgment.  Pederson argues  that  because
there  was no clear and convincing evidence that his conduct  was
reckless rather than negligent, the court should have granted his
motion for a directed verdict instead of presenting the issue  of
punitive damages to the jury .36
          We  review  the  decision to submit a punitive  damages
determination  to  the  jury  for abuse  of  discretion.37   More
generally, when reviewing a superior courts decision  to  deny  a
motion  for  a  directed verdict, we will determine  whether  the
evidence,  when  viewed  in  the  light  most  favorable  to  the
non-moving  party,  is such that reasonable [persons]  could  not
differ in their judgment. 38
          In  order  for  a  jury to make an  award  of  punitive
damages,   AS  09.17.020(b)  requires  there  to  be  clear   and
convincing evidence of either outrageousness, which includes acts
done with malice or bad motives,39 or reckless indifference to the
interest  of another person.40  At trial, Barnes stipulated  that
Pederson  did  not have malice, and the superior court  concluded
that  there was no evidence that Pederson had any ill or  hostile
or  bad motives.  We therefore need to determine whether Pederson
was recklessly indifferent to Barness interests.
          A  review of the record leads us to conclude that there
is  no evidence that Pederson acted with reckless indifference to
Barness rights.  Viewing the evidence in the light most favorable
to  Barnes,  there  is  no indication that  Pederson  had  actual
knowledge  of  Aikens  wrongdoing.  Nor is  there  evidence  that
Pederson  attempted  to  avoid knowledge  of  Aikens  misconduct.
Instead, when Pederson first received the therapists accusations,
he   conducted   a   partial  investigation  by  discussing   the
accusations with both Aiken and Parks.  He even tried to  contact
the  therapist.  Pederson did fail to appreciate the significance
of  certain warning signs of Aikens misconduct, such as the  high
rates of return from the purported investments.  Yet even Barness
expert   witness  who  testified  that  Pederson  had   committed
malpractice  never characterized Pedersons behavior as  reckless.
When  Pederson  did  eventually learn of  Aikens  misconduct,  he
promptly reported it to the court.
          Barnes argues that Pederson was reckless when he failed
to  acquire  and  inspect  a copy of the  accounting  that  Aiken
submitted to the court on March 31, 1998.  Barnes further  argues
that  Pederson  was recklessly indifferent to her interests  when
he,  in his report to the court, indicated that no SBS funds  had
been paid,  even though at the time he wrote the report he had  a
document  in  his file indicating that the funds had  been  paid.
Pederson testified that despite the document in his file, he  did
not  believe that Barnes had received the SBS funds.   Aiken  had
explained to Pederson that the SBS check had not cleared and that
he  had  chosen instead to defer the payment.  According  to  the
Restatement (Second) of Torts, [p]unitive damages are not awarded
for  mere inadvertence, mistake, errors of judgment and the like,
which  constitute  ordinary negligence [but  are  restricted  to]
conduct involving some element of outrage similar to that usually
          found in crime.41  While in retrospect it appears foolish for
Pederson  to  have  believed Aiken and to have allowed  Aiken  to
submit  any documents to the court on his own, we cannot conclude
that Pedersons actions contained the element of outrageousness or
recklessness necessary to justify an award of punitive damages.
          Given the absence of evidence that Pederson acted  with
reckless indifference to Barness interests, we conclude that  the
denial of Pedersons motion for a directed verdict on the issue of
punitive damages was an abuse of discretion.
     D.   The  Date  on  Which Prejudgment Interest  Should  Have
          Begun To Accrue.
          
          Alaska  Statute  09.30.070(b)  provides  that,  barring
exceptions not applicable in this case,
          prejudgment  interest accrues  from  the  day
          process is served on the defendant or the day
          the  defendant received written  notification
          that  an injury has occurred and that a claim
          may be brought against the defendant for that
          injury,  whichever is earlier.   The  written
          notification must be of a nature  that  would
          lead a prudent person to believe that a claim
          will be made against the person receiving the
          notification, for personal injury, death,  or
          damage to property.
          
          Pederson    argues   that   rather   than   calculating
prejudgment  interest  from  October  27,  1999,  the  date  that
Pederson  became  aware  of Aikens wrongdoing  and  informed  the
court,  the court should instead have deemed interest  to  accrue
from  August  16,  2001, the date that Barness attorney  wrote  a
demand letter to Pederson.  According to Pederson, the August 16,
2001  letter was the first written notice he received that Barnes
would pursue a claim against him.
          The  determination of when prejudgment interest  begins
to accrue presents a legal question that we review de novo.42
          Alaska   Statute  09.30.070(b)  makes  it  clear   that
prejudgment  interest  begins to accrue  on  the  date  that  the
defendant  learns  that the plaintiff has a  claim  against  him,
rather  than on the date the defendant learns that the  plaintiff
has suffered a loss.  While Pederson learned on October 27, 1999,
that  Aiken had committed wrongdoing leading to Barness loss,  it
was  not  until  August 16, 2001, when Pederson received  Barness
demand letter, that he learned that she would be pursuing a claim
against him.  We therefore reverse the superior courts choice  of
date  for  the accrual of prejudgment interest and remand  for  a
calculation  of  prejudgment interest accruing  from  August  16,
2001.
IV.  CONCLUSION
          For  the  above  reasons we AFFIRM the superior  courts
denial  of  Pedersons motion for summary judgment.   However,  we
VACATE the superior courts award of compensatory damages, REVERSE
the  superior  courts denial of Pedersons motion for  a  directed
verdict  on  the  issue  of  punitive damages,  and  REVERSE  the
superior  courts  choice of date for the accrual  of  prejudgment
interest.   We  REMAND the case so that the  superior  court  can
recalculate  Pedersons  share  of compensatory  damages  and  the
amount he owes in prejudgment interest.
_______________________________
     1      In  December  2003  Barnes  was  substituted  as  the
plaintiff  for  Parks.  All references in  this  opinion  to  the
plaintiff will use Barness name.  Additionally, all references to
the  defendant  or  appellant will employ  Pedersons  name,  even
though Nangle was also sued and held jointly liable.

     2    558 P.2d 988 (Ariz. App. 1976).

     3      1055 (Alaska 2005).  Barnes, like the appellee in  On
drusek, id. at 1056 n.2, does not argue that the fact that the cas
e was ultimately decided on the merits should prevent this cour

     4     Ondrusek v. Murphy, 120 P.3d 1053, 1055 (Alaska 2005).
Barnes, like the appellee in Ondrusek, id. at 1056 n.2, does  not
argue  that the fact that the case was ultimately decided on  the
merits  should prevent this court from considering the denial  of
the motion for summary judgment.  Since the point was not raised,
we  will postpone consideration of this issue until a later case.
Id.

     5    Id. at 1055.

     6    Id. at 1055-56 (citations and quotation marks omitted).

     7     Restatement (Third) of the Law Governing  Lawyers   51
(2000).

     8    Id. at  51(4).

     9     Id.  at   51  cmt.  h  (explaining  that  a  nonclient
beneficiary is unable to protect her rights when she is too young
to manage her own affairs).

     10     See  Alaska  Rule of Professional Conduct  1.6(b)(1),
which permits lawyers to disclose confidential client information
when  the  lawyer  believes  that the  disclosure  is  reasonably
necessary  to prevent a crime by client that is likely to  result
in  substantial injury to the property of another; see  also  the
comment to Alaska Rule of Professional Conduct 1.14 (stating that
if  a  guardians  lawyer  is aware that the  guardian  is  acting
adversely  to  the  wards  interest,  the  lawyer  may  have   an
obligation to prevent or rectify the guardians misconduct.).

     11     Restatement (Third) of the Law Governing Lawyers   51
cmt. h (internal quotations omitted).

     12    Id.

     13    Restatement (Second) of Torts  12 (1965).

     14     Restatement (Third) of the Law Governing Lawyers   51
cmt. h.

     15    Pederson also complains about the courts instruction to
the jury explaining the duty of care to a non-client but for some
unexplained reason makes explicit his decision not to appeal this
issue.  As a result, we will not address the courts inclusion  of
a  duty  to investigate into the know or reason to know  standard
used in the jury instruction.

     16     Odum v. Univ. of Alaska, Anchorage, 845 P.2d 432, 434
(Alaska 1993).

     17    Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).

     18     Western  Star Trucks, Inc. v. Big Iron Equip.  Serv.,
Inc., 101 P.3d 1047, 1050 (Alaska 2004).

     19    AS 09.17.080 reads in full:

               (a)  In  all actions involving fault  of
          more  than  one person, including third-party
          defendants  and persons who have  settled  or
          otherwise  been released, the  court,  unless
          otherwise   agreed  by  all  parties,   shall
          instruct   the   jury   to   answer   special
          interrogatories  or, if  there  is  no  jury,
          shall make findings, indicating
          
               (1)  the amount of damages each claimant
          would  be entitled to recover if contributory
          fault is disregarded; and
          
               (2)  the  percentage of the total  fault
          that   is   allocated   to   each   claimant,
          defendant, third-party defendant, person  who
          has  been  released from liability, or  other
          person responsible for the damages unless the
          person   was   identified  as  a  potentially
          responsible  person,  the  person  is  not  a
          person protected from a civil action under AS
          09.10.055,  and the parties had a  sufficient
          opportunity to join that person in the action
          but   chose   not  to;  in  this   paragraph,
          sufficient  opportunity  to  join  means  the
          person is
          
               (A)       within      the
               jurisdiction    of    the
               court;
               
               (B)  not  precluded  from
               being  joined by  law  or
               court rule; and
               
               (C) reasonably locatable.
               
               (b)  In  determining the percentages  of
          fault, the trier of fact shall consider  both
          the  nature of the conduct of each person  at
          fault,  and the extent of the causal relation
          between the conduct and the damages claimed.
          
               (c)  The court shall determine the award
          of  damages  to  each claimant in  accordance
          with  the findings and enter judgment against
          each  party  liable.  The  court  also  shall
          determine  and  state in  the  judgment  each
          partys  equitable share of the obligation  to
          each   claimant   in  accordance   with   the
          respective percentages of fault as determined
          under   (a)  of  this  section.   Except   as
          provided under AS 23.30.015(g), an assessment
          of a percentage of fault against a person who
          is  not a party may only be used as a measure
          for accurately determining the percentages of
          fault  of  a  named party.  Assessment  of  a
          percentage of fault against a person  who  is
          not  a party does not subject that person  to
          civil liability in that action and may not be
          used  as  evidence  of  civil  liability   in
          another action.
          
               (d)   The  court  shall  enter  judgment
          against  each  party liable on the  basis  of
          several  liability  in accordance  with  that
          partys percentage of fault.
          
     20     After  the  amendment,  AS  09.17.900  now  reads  in
pertinent part: In this chapter, fault includes acts or omissions
that  are  in  any  measure negligent, reckless,  or  intentional
toward  the  person or property of the actor or others,  or  that
subject a person to strict tort liability.

     21     Kodiak  Island  Borough v. Roe, 63  P.3d  1009,  1014
(Alaska 2003).

     22     Id.   Restatement (Third) of Torts: Apportionment  of
Liability  14 (2000) states:

          A  person who is liable to another based on a
          failure   to  protect  the  other  from   the
          specific  risk  of  an  intentional  tort  is
          jointly and severally liable for the share of
          comparative  responsibility assigned  to  the
          intentional  tortfeasor in  addition  to  the
          share  of comparative responsibility assigned
          to the person.
          
     23    63 P.3d at 1015.

     24    No. 3AN-01-10389 CI (Alaska Super., Mar. 16, 2004).

     25    Id. at 9.

     26    Id.

     27    Id. at 11.

     28     Restatement  (Third)  of the  Law  Governing  Lawyers
51(4)(b)(i).

     29    See supra pages 9-12.

     30      Restatement  (Third)  of  Torts:  Apportionment   of
Liability  14.

     31     Report of the Governors Advisory Task Force on  Civil
Justice Reform 51 (1996).

     32     House  Majority  Leader Brian  S.  Porter,  Sectional
Summary of Senate CS for CS for SS for HM 58 (RLS) am S:  An  Act
Relating to Civil Actions  14 (Apr. 20, 1997).

     33     The issue of the availability of an offset is pending
before  this  court in Diggins v. Jackson, Supreme Court  No.  S-
11141,  and as to an earlier tort reform regime, in Petrolane  v.
Robles, Supreme Court No. S-11042.

     34    See Luth v. Rogers & Babler Constr. Co., 507 P.2d 761,
766-67  (Alaska 1973) (reaching the issue of offset in a pre-tort
reform  context,  but only after the plaintiffs  had  received  a
$3,500  payment from people they could have joined as defendants.
Because  the $3,500 payment amounted to half of the jury-returned
damage  verdict,  the plaintiffs would have  received  a  partial
double recovery had the offset not been permitted).

     35    While the superior court initially authorized the jury
to  decide  Barness  claim for punitive  damages  resulting  from
Pedersons  conduct after November 12, 1998, the  special  verdict
form  asked the jury to determine whether Pedersons conduct after
November 16, 1998, was outrageous.

     36     Pederson also argues that his motion for  a  directed
verdict  should  have  been granted because (1)  Aikens  criminal
conduct served as a superseding cause of Barness damages, and (2)
Barnes  failed  to  present any expert testimony  that  Pedersons
conduct  was reckless rather than merely negligent.   Because  we
conclude  that  there  is no clear and convincing  evidence  that
Pedersons  conduct  was  reckless, we decline  to  address  these
additional arguments.

     37     Wal-Mart, Inc. v. Stewart, 990 P.2d 626, 637  (Alaska
1999).

     38    Id. at 632 (quoting City of Whittier v. Whittier Fuel &
Marine  Corp.,  577  P.2d 216, 220 (Alaska 1978)  (alteration  in
original)).

     39    AS 09.17.020(b)(1).

     40    AS 09.17.020(b)(2).

     41     State  v. Hazelwood, 946 P.2d 875, 889 (Alaska  1997)
(Compton,  C.J.,  dissenting) (quoting  Restatement  (Second)  of
Torts  908 cmt. b) (alteration in original).

     42    Lloyds & Inst. of London Underwriting Cos. v. Fulton, 2
P.3d 1199, 1210 (Alaska 2000).

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