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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State v. Alaska Public Employees Association (12/19/2008) sp-6330

State v. Alaska Public Employees Association (12/19/2008) sp-6330, 199 P3d 1161

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
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     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


) Supreme Court No. S- 12752
) Superior Court No. 1JU-05- 693 CI
v. )
) O P I N I O N
ASSOCIATION, AFT, AFL-CIO; ) No. 6330 December 19, 2008

          Appeal  from the Superior Court of the  State
          of  Alaska, First Judicial District,  Juneau,
          Patricia A. Collins, Judge.

          Appearances:   William  E.  Milks,  Assistant
          Attorney  General, Talis J. Colberg, Attorney
          General,  Juneau,  for Appellant.   Sarah  E.
          Josephson,   Jermain,   Dunnagan   &   Owens,
          Anchorage,   for   Appellee   Alaska   Public
          Employees Association, AFT, AFL-CIO.   Steven
          T. Baseden, pro se, Juneau.

          Before:   Matthews, Eastaugh, Carpeneti,  and
          Winfree, Justices.  [Fabe, Chief Justice, not

          MATTHEWS, Justice.
Facts and Proceedings1
          Steve  Baseden  was  terminated from state  employment.
The  Alaska Public Employees Association (APEA) filed a grievance
under the collective bargaining agreement (CBA) between APEA  and
the  State  challenging Basedens termination.  The grievance  was
submitted  to  binding arbitration.  By the time of the  hearing,
          the State had conceded that Basedens termination was without just
cause  and had offered him reinstatement.  The arbitrator awarded
back  pay  from  the termination date, April  14,  2000,  to  the
effective  date  of  the reinstatement offer, October  15,  2001.
Basedens other employment earnings during this period were to  be
deducted from the award.  Interest was required to be paid on the
net  award.   The arbitrator assessed costs and fees against  the
          The   State   filed  a  complaint  in  superior   court
challenging,  among  other  things,  the  arbitrators  award   of
interest.   After  briefs  were  submitted  the  superior   court
confirmed the arbitrators award, including the award of interest.
The  State appeals only the superior courts confirmation  of  the
interest award.
Standard of Review
          We  review the superior courts decision confirming  the
arbitrators award de novo.2  An arbitrators decision is  accorded
great deference.3  Both the common law and Alaska statutes evince
a  strong public policy in favor of arbitration. 4  To effectuate
this  public  policy we have followed a policy of  minimal  court
interference with arbitration.5  This deference extends  to  both
the    arbitrators   factual   findings   and   the   arbitrators
interpretation and application of the law.6
          Where  one  party  alleges  that  the  arbitrator   has
exceeded  his  or  her authority, we will affirm the  arbitrators
conclusion  as  to  the  scope  of  his  or  her  powers  if  the
arbitrators conclusion is reasonably possible. 7  The standard of
review  of  grievance arbitration arising out of labor management
contracts mandated by the Public Employment Relations Act8 (PERA)
that  are not subject to either of the Uniform Arbitration  Acts9
is gross error.10  Gross error encompasses only mistakes that are
both obvious and significant.11
The  Arbitrators  Award  of Prejudgment Interest  Was  Not  Gross
          This appeal involves an intersection of competing legal
doctrines.  In the context of other damages claims, we have  held
that  prejudgment interest can only be awarded against the  state
when  the state expressly consents by statute.  But we have  also
consistently articulated a deferential standard of review for  an
arbitrators   decision,  recognizing  that  the  arbitrator   can
determine  the scope of issues presented and the availability  of
          The  State  urges a strict application of  the  express
legislative  waiver  rule for sovereign  immunity  that  we  have
articulated  in  Hawken Northwest, Inc. v. State,  Department  of
Administration,12  Quality  Asphalt  Paving,   Inc.   v.   State,
Department  of  Transportation  &  Public  Facilities,13  Samissa
Anchorage, Inc. v. Department of Health & Social Services,14  and
Danco   Exploration,  Inc.  v.  State,  Department   of   Natural
Resources.15  The rule, as expressed in Hawken Northwest, is that
prejudgment interest may not be assessed against the state unless
specifically authorized by legislation.16
          The  arbitrator did not address sovereign immunity when
he  awarded  interest.   Interest  was  first  requested  in  the
          arbitration proceeding by APEA in its post-hearing brief.  The
State  seems never to have mentioned interest, and neither  party
mentioned  sovereign  immunity  in the  arbitration  proceedings.
Arguably,  the  State waived its right to contest  the  award  of
interest  on  sovereign immunity grounds on appeal.  But  because
there  is  authority that the sovereign immunity defense  is  not
necessarily waived by failure to raise it in initial proceedings,17
we  decide this case on the merits.  This makes resolution of the
question  of  the waivability of sovereign immunity  unnecessary.
In  deciding  the  merits, we assume that the arbitrator  decided
that sovereign immunity did not bar the award of interest and ask
whether such a decision was gross error.
          In  support  of  the arbitrators award of  interest,  a
number of observations may be made.
          Strictly  applying the express legislative waiver  rule
in  cases involving arbitration under PERA could lead to a result
that  even the State does not seek.  While PERA mandates  binding
arbitration,  it  does  not  in so  many  words  waive  sovereign
immunity as to either damages or interest on damages.18  But it is
clear  that  the  legislature has waived at least some  sovereign
immunity by requiring binding arbitration of grievances.19   Thus
it was the arbitrators duty, at least initially, to determine the
scope of the States waiver of immunity.
          In  making  this  determination  the  arbitrator  could
reasonably have relied on our decision in Native Village of  Eyak
v.  GC  Contractors.20  In that case an Indian tribe had  entered
into  a construction contract containing an arbitration clause.21
The  tribe  contended  that the arbitration  clause  was  not  an
effective  waiver  of its sovereign immunity from  suit.22   This
court  recognized the doctrine that a tribes waiver of  sovereign
immunity  cannot be implied but must be unequivocally expressed23
and   held  that  the  arbitration  clause  was  necessarily   an
unequivocal  expression  of waiver of immunity.24   Although  the
arbitration clause itself said nothing about sovereign  immunity,
we observed:
          [I]t is clear that any dispute arising from a
          contract  cannot be resolved by  arbitration,
          as  specified in the contract, if one of  the
          parties  intends  to assert  the  defense  of
          sovereign  immunity.  To the extent possible,
          all  provisions in a contract should be found
          meaningful.  The arbitration clause in  Eyaks
          contract   with  GC  Contractors   would   be
          meaningless if it did not constitute a waiver
          of whatever immunity Eyak possessed.[25]
We  therefore  concluded that a waiver of sovereign immunity  was
effected  by the arbitration clause:  Accordingly, we  hold  that
Eyak  waived whatever immunity from suit it possessed by entering
into  a contract with GC Contractors containing an agreement that
any  disputes  arising under the contract would  be  resolved  by
          None  of  the  precedents  that  the  State  relies  on
involved  an appeal from an arbitrators award.  Hawken  Northwest
          and Quality Asphalt Paving involved appeals from administrative
resolutions  of  contract  claims under the  procurement  code.27
Samissa   Anchorage  involved  an  administrative  challenge   to
Medicaid  reimbursement rates.28   Danco Exploration involved  an
administrative decision to deem an oil and gas lease forfeited.29
The  standard of review that we employed in these cases  is  less
deferential than the gross error standard we use here.30
          Further,  the  rule requiring a legislative  waiver  of
sovereign  immunity that expressly mentions interest  has  become
something  of  an anachronism.  In 2001 the legislature  added  a
section  to  the state procurement code that permits  prejudgment
interest  awards  in  claims  filed  with  an  agency  after  the
effective  date  of the act.31  Although the  scope  of  the  new
section  is  ambiguous,32 it reflects at least to some  degree  a
legislative  concurrence  with the proposition  that  prejudgment
interest  should  be  paid  by  the  State  on  duly  established
compensatory damage claims.33
          Finding a waiver of sovereign immunity as in Eyak would
not  necessarily resolve the issue of the scope of  that  waiver.
Here  the waiver could reasonably encompass prejudgment interest.
The State has consented explicitly in AS 09.50.280 to prejudgment
interest  awards for contract claims that may be brought  against
the  State  in the superior court.  If arbitration is to  achieve
its  promise as a fair, just, and expeditious means of  resolving
disputes,  the  normal prejudgment interest award that  would  be
available in court should also be available in arbitration.34
          Moreover, we recently held that an arbitrators award in
a   dispute  arising  under  a  collective  bargaining  agreement
governed  by  PERA will bear interest between  the  date  of  the
arbitral  award and the date of the superior courts  confirmation
of the award.35  It would seem strange to conclude that the States
waiver  of immunity allows a party to be made whole with  respect
to  prejudgment  interest  accruing  between  an  award  and  its
confirmation but not for the pre-award period.
          This case presented a close question as to which of two
principles should be applied to determine when and to what extent
sovereign  immunity  has  been waived.   One  principle  requires
express  legislative waiver of sovereign immunity to  award  pre-
judgment  interest  against  the  State.   The  other  principle,
potentially  derivable from Eyak, is that the States  consent  to
arbitration amounts to an express waiver of sovereign immunity to
the   extent  needed  to  make  a  claimant  whole  by   awarding
prejudgment   interest.   Considering  the  closeness   of   this
question,  the  policy  favoring effective arbitration,  and  the
fairness of awarding interest, we are unable to conclude that the
arbitrators  decision to award prejudgment interest  against  the
State was gross error.
          The  decision  of  the  superior court  confirming  the
arbitrators award of prejudgment interest is AFFIRMED.
     1     A more detailed review of the facts and proceedings in
this  case  is set out in Baseden v. State, 174 P.3d 233,  235-37
(Alaska 2008).

     2    Id. at 237.

     3     Alaska State Employees Assn/AFSCME Local 52 v.  State,
74 P.3d 881, 882 (Alaska 2003).

     4     Baseden, 174 P.3d at 237 (quoting Dept of Pub.  Safety
v.  Pub.  Safety  Employees Assn, 732  P.2d  1090,  1093  (Alaska

     5     Pub.  Safety Employees Assn, 732 P.2d at 1093 (quoting
City  of  Fairbanks Mun. Utils. Sys. v. Lees, 705 P.2d  457,  460
(Alaska 1985)) (quotation marks omitted).

     6    OK Lumber Co. v. Alaska R.R. Corp., 123 P.3d 1076, 1078
(Alaska  2005) (citing Ahtna, Inc. v. Ebasco Constructors,  Inc.,
894 P.2d 657, 660 (Alaska 1995)).

     7     Kinn v. Alaska Sales & Serv., Inc., 144 P.3d 474, 482-
83  (Alaska 2006) (quoting Marathon Oil Co. v. ARCO Alaska, Inc.,
972 P.2d 595, 600 (Alaska 1999)).

     8    AS

     9    AS; AS 09.43.300.595.

     10     Pub. Safety Employees Assn, Local 92 v. State (PSEA),
895  P.2d 980, 984 (Alaska 1995).  In our first decision in  this
case,  Baseden, 174 P.3d at 238, we echoed a suggestion  made  in
two  earlier cases, Alaska State Employees Assn/AFSCME  Local 52,
74  P.3d  at 882-83, and University of Alaska v. Alaska Community
Colleges  Federation of Teachers, Local 2404, 64  P.3d  823,  826
(Alaska 2003), to the effect that it was an open question whether
the   gross  error  standard  or  the  arbitrary  and  capricious
standard,  which  is  said to be more searching   that  is,  less
deferential  to  an  arbitrators decision   should  be  employed.
These  cases  seem to be based on the view that our statement  in
PSEA to the effect that gross error governs grievance arbitration
disputes  was dictum.  While this view is correct, we  take  this
opportunity  to  confirm  the  dictum  in  PSEA  because  it   is
consistent  with  the  standard we employ  for  labor  management
grievance arbitration mandated by contracts that are not governed
by  PERA, and we see no reason why a different standard should be
used in grievance arbitration governed by PERA.  See Nizinski  v.
Golden Valley Elec. Assn, 509 P.2d 280, 283 (Alaska 1973).

     11    PSEA, 895 P.2d at 984.

     12    76 P.3d 371, 382-83 (Alaska 2003).

     13    71 P.3d 865, 880 (Alaska 2003).

     14    57 P.3d 676, 680-81 (Alaska 2002).

     15    924 P.2d 432, 434 (Alaska 1996).

     16    Hawken Nw., 76 P.3d at 382.

     17     See,  e.g.,  State v. Haley, 687 P.2d 305,  318  n.11
(Alaska  1984)  (rejecting  the argument  the  State  waived  its
legislative  immunity  argument  by  not  asserting  it  in   the
proceedings below and stating, the failure to raise this  defense
at  trial  does not necessarily constitute a waiver  of  immunity
(citing Sup. Ct. of Va. v. Consumers Union, 446 U.S. 719, 730 n.9

     18     See AS 23.40.210(a).  We note that arbitration  under
PERA is not generally subject to Alaskas Uniform Arbitration  Act
or  Alaskas  Revised Uniform Arbitration Act unless  one  of  the
uniform   acts  is  expressly  incorporated  in  the   CBA.    AS
09.43.010(a);  AS 09.43.300(c)(d).  The CBA does not  incorporate
either act by its terms.

     19     As  APEA  notes, the State does not  claim  sovereign
immunity from all damages awarded.

     20    658 P.2d 756 (Alaska 1983).

     21    Id. at 757.

     22    Id. at 760.

     23     Id. (quoting Santa Clara Pueblo v. Martinez, 436 U.S.
49, 58 (1978)).

     24    Id. at 760-61.

     25    Id. at 760 (citations omitted).

     26    Id. at 761.

     27    Hawken Nw., Inc. v. State, Dept of Admin., 76 P.3d 371,
376,  382  (Alaska 2003); Quality Asphalt Paving, Inc. v.  State,
Dept  of  Transp. & Pub. Facilities, 71 P.3d 865, 879-80  (Alaska

     28     Samissa  Anchorage, Inc. v. Dept  of  Health  &  Soc.
Servs., 57 P.3d 676, 679-81 (Alaska 2002).

     29    Danco Exploration, Inc. v. State, Dept of Natural Res.,
924 P.2d 432, 433-34 (Alaska 1996).

     30    See, e.g., Hawken Nw., 76 P.3d at 376, 382-83 (applying
de novo review because the question of law did not involve agency
expertise);  Samissa  Anchorage, 57 P.3d  at  678  (applying  the
substitution  of  judgment test because no agency  expertise  was

     31    AS 36.30.623 provides:

               The  amount ultimately determined to  be
          due    under   AS   36.30.62036.30.630    and
          36.30.67036.30.685    to     a     department
          contractor,  the department, or a contracting
          agency   to   whom  the  responsibility   for
          handling  the  claims  is  delegated  by  the
          department   under   AS   36.30.632   accrues
          interest  at the rate applicable to judgments
          under  AS  09.30.070(a).  Notwithstanding  AS
          09.30.070(b), the interest accrues  from  the
          date  that  a  complete claim is  filed  that
          meets  the  requirements of  AS  36.30.620(a)
          through  the  date  of  a  decision  by   the
          procurement  officer under  AS  36.30.620,  a
          decision     by    the    commissioner     of
          transportation and public facilities under AS
          36.30.680,  or a judicial decision  under  AS
          36.30.685, whichever decision is latest.   In
          this section, department means the Department
          of Transportation and Public Facilities.
     32    In Hawken Northwest we observed that although the newly
added  section  defined  department to  mean  the  Department  of
Transportation  and Public Facilities, we assumed for  discussion
purposes  that the provision would apply to claims filed  against
other agencies.  76 P.3d at 383 n.40.  The state procurement code
itself  broadly applies to the procurement of supplies, services,
and    professional    services    by    state    agencies    and
instrumentalities.  See AS

     33     The  arbitrator  in this case  relied  on  a  similar

               In  virtually  all other forums   courts
          and  administrative  agencies   a  prevailing
          party  routinely receives interest on delayed
          payments.    That  is  a  matter  of   simple
          justice;  getting a sum a year late does  not
          make  the recipient whole.  Interest  is  the
          normal  way  to compensate the injured  party
          for  delayed  payment.  Interest  awards  are
          relatively   unusual  in  labor  arbitration,
          apparently  only because parties seldom  seek
(Quoting Atl. Se. Airlines, 101 Lab. Arb. 515, 525 (1993) (Nolan,
Arb.).)   The arbitrator considered whether to award interest  to
be a matter for arbitral discretion.

     34     See  Gilbert v. Sperbeck, 126 P.3d 1057, 1060 (Alaska
2005)   (noting that arbitration proceedings should be  fair  and
just and that Alaska policy favors arbitration).

     35     State  v. Alaska State Employees Assn, 190  P.3d  720
(Alaska 2008).  In Alaska State Employees Assn we noted that only
an  arbitrator  can award interest for the pre-arbitration  award
time  period, but in so noting we did not purport to resolve  the
issues presented in this case.  Id. at 725 & n.26  (citing Ebasco
Constructors, Inc. v. Ahtna, Inc., 932 P.2d 1312, 1217-18 (Alaska

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