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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Reust v. Alaska Petroleum Contractors, Inc. (04/10/2009) sp-6359

Reust v. Alaska Petroleum Contractors, Inc. (04/10/2009) sp-6359

     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

DAN REUST, )
) Supreme Court No. S- 12863
Appellant,)
) Superior Court No. 3KN-99- 132 CI
v. )
) O P I N I O N
ALASKA PETROLEUM )
CONTRACTORS, INC., ) No. 6359 April 10, 2009
)
Appellee,)
)
and )
)
STATE OF ALASKA, )
)
Appellee/Intervenor. )
)
          Appeal  from the Superior Court of the  State
          of  Alaska,  Third Judicial District,  Kenai,
          Charles T. Huguelet, Judge.

          Appearances:  Arthur S. Robinson, Robinson  &
          Associates,  Soldotna, for  Appellant.   Ruth
          Botstein,  Assistant Attorney General,  Talis
          J.  Colberg, Attorney General, Anchorage, for
          Appellee/Intervenor State of Alaska.

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

          MATTHEWS, Justice.

          This  case is here for the second time.1  After a  jury
awarded  Dan Reust compensatory damages of $389,000 and  punitive
damages  of $4.3 million in a retaliatory discharge suit  against
his  employer, Alaska Petroleum Contractors (APC), the State  was
          permitted to intervene to protect its interest in the punitive
damages award.2  The superior court reduced the punitive award to
$500,000 using the cap provisions of AS 09.17.020(h) and required
that  half  of the net award of punitive damages be paid  to  the
State.3  Reust and APC appealed.  We held on appeal that (1)  the
provisions  of  AS 09.17.020 awarding fifty percent  of  punitive
damages   to   the  State  and  capping  punitive   damages   are
constitutional;   (2)  the  State  was  properly   permitted   to
intervene;  (3) Reusts award of lost wages should be  limited  to
three  years  after  termination, rather than  ten  as  the  jury
determined;  and  (4)  the cap provisions of  subsection  .020(f)
rather than (h) should have been used.4  We remanded the case  to
the  superior  court with instructions to reduce the  lost  wages
award to three years, to apply the punitive damages cap expressed
in  subsection .020(f), and to consider whether the  recalculated
punitive award would be excessive.5
          After  our opinion was published, Reust and APC entered
into  a settlement agreement.  Under the agreement APC paid Reust
$1  million6  in  exchange for a release of  all  claims.   Reust
agreed  to defend and indemnify APC from any claims by the  State
for  punitive  damages,  and agreed  to  place  $200,000  of  the
settlement proceeds in the court registry so those proceeds would
be  available should the State assert any claim it might have for
punitive  damages.   Reust and APC then filed a  stipulation  for
dismissal   in  the  superior  court.   The  State  objected   to
dismissal, noting that it was a party to the action, that it  had
not  agreed to the stipulation or the settlement, and that it had
not received its share of punitive damages.
          The  superior  court refused to dismiss the  case.   In
making  this ruling the superior court summarized Reusts position
that the State should receive nothing as follows:  he argues that
the  case  is  in the same posture as it would have been  if  the
parties settled before the jury delivered its verdict.  The court
rejected this argument, stating that
          [a]llowing   plaintiffs  to  avoid   dividing
          punitive awards with the State by negotiating
          a post-verdict settlement would frustrate the
          purpose of AS 09.17.020(j).  The State gained
          an   interest   when  the  verdict   awarding
          punitive damages was published.  The  Supreme
          Courts  remand  to determine  the  amount  of
          punitive  damages  does  not  eliminate   the
          interest.
          
          After   additional   briefing,   the   superior   court
calculated  punitive damages under the subsection .020(f)(1)  cap
to  be  $716,525.52,7 determined that this amount  would  not  be
excessive,  and ordered that half of this amount be paid  to  the
State after adjustments for a pro rata portion of Reusts counsels
fees  expended in obtaining the award.  Subsequently,  the  court
entered  a final judgment granting the State $207,792.40  as  its
net  share  of  punitive damages to be recovered  against  Alaska
Petroleum Contractors (or plaintiff pursuant to the plaintiff and
defendants settlement agreement).
          Reust appeals from this judgment.
          He  contends  that  the  State has  no  interest  in  a
punitive damages award until a formal judgment is entered, rather
than,  as  the  superior court held, when a verdict is  returned.
Reust  also  argues  that once this court reversed  the  punitive
damages  judgment,  the State no longer had an  interest  in  the
settlement proceeds.  We address these issues in turn.
     A.   The   States  Interest  in  a  Punitive  Damages  Award
          Attaches when a Verdict Is Returned.
          
          The  first sentence of AS 09.17.020(j) grants the State
a  right to fifty percent of any punitive damages award, and  the
second  sentence provides that the subsection does not grant  the
state  the  right  to  file  or join a civil  action  to  recover
punitive  damages.   Taken as a whole, this  subsection  is  most
sensibly  interpreted to mean that before a verdict is  returned,
the  State may not intervene in a claim seeking punitive damages;
however,  once  a verdict for punitive damages is  returned,  the
States interest in punitive damages comes into existence and  the
State  may  intervene  to protect this  interest.   A  number  of
reasons support this reading.
          Variations  of  the  word  award  are  used  throughout
AS  09.17.020 to refer to a verdict8 or to a verdict as  adjusted
by  a  cap  on damages.9  Thus, in subsection .020(j) the  phrase
[i]f a person receives an award of punitive damages refers to the
receipt of a verdict and any adjustment of it necessitated by one
of  the cap subsections, and not to receipt of a judgment nor, as
Reust  also  suggests,  receipt  of  money  paid  pursuant  to  a
judgment.
          We  stated  in  Reust I:  [I]t appears that  the  state
should always be permitted to intervene when there is any dispute
about how a punitive damages award is to be allocated.10  Because
this  observation  was  made in the context  of  an  intervention
request  that was made before a judgment was entered, it supports
the conclusion we reach today.
          It  is  hard  to think that any other rule  would  make
sense.  If by the device of a post-verdict settlement a plaintiff
could  eliminate  the need to recognize the  States  interest  in
punitive  damages,  such  settlements  would  almost  always   be
accomplished and the State would almost never receive  its  share
of  punitive  damages.   The interpretation  advocated  by  Reust
would,   in   other   words,  make  subsection   .020(j)   nearly
meaningless.   In  Reust  I we indicated  that  the  purposes  of
subsection .020(j) were to reduce the incentive for plaintiffs to
pursue   punitive   damages   claims   and   encourage   pretrial
settlements, since the state only shares in punitive damages when
an  award  is  made.11   We  also took note  of  the  purpose  of
[i]ncreasing state revenues by allocating a portion  of  punitive
damages  awards  to the state based on the analogy  between  such
awards  and  civil  and criminal fines that underlies  subsection
.020(j).12   These  purposes  would be  frustrated,  rather  than
achieved, if we were to adopt Reusts position.
     B.   The  States Interest in the Punitive Damages Award  Was
          Not Eliminated by Reust I.
          
          Did our decision in Reust I return this case to its pre-
verdict status in which Reust would be free to settle without any
need to recognize the States interest?  We answer in the negative
for the following reasons.
          Our  decision  did not reverse the jurys  determination
that punitive damages should be awarded; nor did it require a new
jury  determination  as to what the amount  of  punitive  damages
should  be.   Instead,  we required that the  applicable  cap  on
punitive damages be calculated.13  This calculation entailed  the
use  of the formula set out in subsection .020(f)(1)  three times
the award of compensatory damages.14  Our remand also required the
recalculation  of  compensatory  damages.15   But  this  too  was
accomplished based on the initial verdict without the need for  a
new  trial.16   Because  no new trial was  required,  the  States
interest that attached when the verdict was announced remained in
effect.   It  follows that Reust could not eliminate  the  States
interest by settling with APC.17
     C.   Post-Judgment Interest and Cost Adjustments.
          Reusts  final  point  on appeal is  that  post-judgment
interest should be set at the rate of interest that was in effect
at the time of the first judgment, 4.25%, rather than the rate on
judgments when the judgment after remand was issued, 9.25%.  This
argument is based on Appellant Rule 509, which provides:
               If  a judgment for money in a civil case
          is  affirmed, interest at the rate prescribed
          by  law  shall be payable from the  effective
          date of the judgment of the trial court.   If
          in  a  civil  case a judgment is modified  or
          reversed with directions that a judgment  for
          money  be issued by the trial court, interest
          on the new judgment at the rate prescribed by
          law  shall be payable from the effective date
          of  the prior judgment which was modified  or
          reversed.
          
Reusts point is well taken and the State concedes it.  The  State
also  suggests  that  in  light  of  our  decision  in  State  v.
Carpenter,18  a  pro rata share of Reusts costs, in  addition  to
attorneys  fees, should have been deducted from the States  share
of  punitive  damages.  We agree.  As we held in Carpenter,  [i]n
order  to ensure that the state is not unjustly enriched  at  the
expense of litigants, we read AS 09.60.080 to require a pro  rata
deduction of costs from the states share of the punitive  damages
award.19
          For  the  above  reasons, we conclude  that  this  case
should  be  remanded to the superior court with  instructions  to
modify  the  judgment  by  changing  the  post-judgment  rate  of
interest  on  the judgment to 4.25% and by deducting  Reusts  pro
rata  share  of costs attributable to the States portion  of  the
award.   Except  for  these  changes,  the  judgment  should   be
affirmed.
          AFFIRMED in part and REMANDED for modification.
_______________________________
     1     See Reust v. Alaska Petroleum Contractors, Inc. (Reust
I), 127 P.3d 807 (Alaska 2005).

     2    Id. at 810-11.

     3     Id. at 811.  AS 09.17.020(f), (h) and (j) are involved
in this case.  These subsections provide:

               (f) Except as provided in (g) and (h) of
          this  section,  an award of punitive  damages
          may not exceed the greater of
               (1)   three   times   the   amount    of
          compensatory damages awarded to the plaintiff
          in the action; or
               (2) the sum of $500,000.
               . . . .
               (h)  Notwithstanding any other provision
          of  law, in an action against an employer  to
          recover  damages  for an unlawful  employment
          practice  prohibited  by  AS  18.80.220,  the
          amount  of  punitive damages awarded  by  the
          court or jury may not exceed
               (1)  $200,000 if the employer  has  less
          than 100 employees in this state;
               (2) $300,000 if the employer has 100  or
          more  but  less  than 200 employees  in  this
          state;
               (3) $400,000 if the employer has 200  or
          more  but  less  than 500 employees  in  this
          state; and
               (4) $500,000 if the employer has 500  or
          more employees in this state.
               . . . .
               (j)  If  a  person receives an award  of
          punitive  damages,  the court  shall  require
          that  50  percent of the award  be  deposited
          into  the  general fund of the  state.   This
          subsection does not grant the state the right
          to  file  or  join a civil action to  recover
          punitive damages.
          
     4    See Reust I, 127 P.3d at 817-18, 820-25.

     5    Id. at 826.

     6     The  parties  did  not purport to  allocate  this  sum
between punitive and compensatory damages.

     7      The   subsection  .020(f)(1)  cap  is   three   times
compensatory  damages.  The superior court computed  compensatory
damages as required in Reust I to be $238,841.84.

     8     See for example, AS 09.17.020(a):  If punitive damages
are  allowed,  a  separate proceeding under (c) of  this  section
shall  be conducted before the same fact finder to determine  the
amount of punitive damages to be awarded.  (Emphasis added.)  See
also  subsection .020(b):  The fact finder may make an  award  of
punitive  damages  only  if the plaintiff  proves  by  clear  and
convincing   evidence  that  the  defendants  conduct   (1)   was
outrageous,  including acts done with malice or bad  motives;  or
(2)  evidenced reckless indifference to the interest  of  another
person.  (Emphasis added.)

     9     See subsection .020(f):  Except as provided in (g) and
(h)  of this section, an award of punitive damages may not exceed
the greater of (1) three times the amount of compensatory damages
awarded  to  the  plaintiff in the action;  or  (2)  the  sum  of
$500,000.  (Emphasis added.)

     10    Reust I, 127 P.3d at 825.

     11     Id.  at 822 (quoting Anderson v. State ex rel.  Cent.
Bering  Sea  Fishermens  Assn (Anderson II),  78  P.3d  710,  717
(Alaska  2003) (Matthews, J., dispositional plurality  opinion)).
In Reust I we stated:

          [A]llocating  half  of  all  punitive  damage
          awards to the state will reduce the incentive
          for  plaintiffs  to pursue  punitive  damages
          claims.   The  statute  will  also  encourage
          plaintiffs  to settle their cases  since  the
          state only shares in punitive damages when an
          award is made.  These incentives could reduce
          both  the  overall number of punitive  damage
          claims  as  well  as the number  of  punitive
          damage  claims  that actually  go  to  trial.
          This  effect could reasonably be expected  to
          have  a  moderating  influence  on  liability
          insurance  premiums.  Further, the  incentive
          to settle punitive damage claims could reduce
          the  length  and  complexity  of  litigation,
          thereby   reducing  the   overall   cost   of
          litigation.
          
Id.  (quoting  Anderson  II,  78  P.3d  at  717)  (alteration  in
original).

     12     Id. (quoting Anderson II, 78 P.3d at 718) (alteration
in original).

     13    See id. at 824-26.

     14    Id.

     15    Id. at 826.

     16    Whether a new trial on punitive damages was required is
important  because  of the purposes of subsection  .020(j).   The
need  for  a  new  trial would mean that the  subsection  .020(j)
incentives  to  settle without a trial could  still  meaningfully
operate  and  potentially  achieve significant  savings  for  the
parties  and the court system.  But as no new trial was required,
the incentives could no longer operate.

     17     Reust  also argues that awarding a share of  punitive
damages  to  the  State  is  an unconstitutional  taking  of  his
property, in violation of the takings clauses of the federal  and
state  constitutions, and also violates his  due  process  rights
secured  under the federal and state constitutions.   Both  these
claims  have  already been decided in Reust I.  No comprehensible
new  claims  based  on  the  facts  following  remand  have  been
asserted.

     18    171 P.3d 41(Alaska 2007).

     19    Id. at 70.

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