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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Beal v. McGuire (09/25/2009) sp-6418
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
| DAVID D. BEAL; JERRY L. COLES; | ) |
| STEVEN E. NATHANSON; | ) Supreme Court No. S- 12626 |
| MICHAEL C. NORMAN; | ) |
| RAYMOND E. GILLS; and | ) Superior Court No. 3AN-03-6511 CI |
| STEPHEN C. SITTER, | ) |
| ) O P I N I O N | |
| Appellants, | ) |
| ) No. 6418 September 25, 2009 | |
| v. | ) |
| ) | |
| DAVID A. MCGUIRE; HEALTH- | ) |
| SOUTH CORPORATION; ALASKA | ) |
| SURGERY CENTER, INC.; ALASKA | ) |
| SURGERY CENTER, LTD.; LOUISE | ) |
| BJORNSTAD; and LAKE OTIS | ) |
| PROFESSIONAL CENTER, LLC, | ) |
| ) | |
| Appellees. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Mark Rindner, Judge.
Appearances: Douglas Pope, Pope & Katcher,
Anchorage, for Appellants. Timothy J.
Petumenos, Birch Horton Bittner & Cherot, and
Roger F. Holmes, Biss & Holmes, Anchorage,
for Appellees.
Before: Eastaugh, Carpeneti, and Winfree,
Justices. [Fabe, Chief Justice, and
Matthews, Justice, not participating.]
EASTAUGH, Justice.
I. INTRODUCTION
Six members of a joint venture sued two other members,
primarily claiming breaches of fiduciary duties. The joint
venture, most of whose members were Anchorage physicians, owned a
medical services condominium on Laurel Street and leased it out
for use as an ambulatory surgical center. The plaintiffs claimed
in part that the joint venturer defendants and others were liable
for moving the surgical center to a building not owned by the
joint venture. They claimed that this diminished the income-
earning capacity of the condominium because an Alaska statute, AS
18.07.031(c), effectively prevented the plaintiffs from replacing
the surgery center on Laurel Street. The superior court granted
complete summary judgment for all the defendants. Because we
conclude that genuine issues of material fact exist both as to
the extent of the fiduciary duty the two joint venturer
defendants owed the plaintiffs and as to whether they breached
that duty, we reverse in part and remand. We affirm the summary
judgment entered for all the other defendants.
II. FACTS AND PROCEEDINGS
This appeal arises out of a lawsuit brought by six
members of a joint venture, Advances in Surgical Care, against
two other joint venturers and against several other persons and
entities.1 The plaintiffs were Anchorage physicians David Beal,
Jerry Coles, Steven Nathanson, Michael Norman, Raymond Gills, and
Stephen Sitter. The two joint venturer defendants were
HealthSouth Corporation and Anchorage physician David McGuire;
the other defendants were former HealthSouth employee Louise
Bjornstad and several business entities.
Ten physicians and one dentist formed Advances in
Surgical Care in 1981. The owners of Advances changed over the
years. When the lawsuit was filed in 2003, there were nine
members; each had an equal ownership interest. The nine were the
six plaintiffs, defendants HealthSouth and Dr. McGuire, and one
other individual. Dr. McGuire was not one of the original
Advances members, but had become a member by July 1982.
HealthSouth became a member in the mid-1990s.
The 1981 organizing document was entitled Joint Venture
Agreement, but it also consistently referred to the members as
partners and to the entity as the Partnership. The 1981 joint
venture agreement defines Partnership to mean joint venture. The
members, including Dr. McGuire, executed an amended agreement in
1982. Like the 1981 agreement, the 1982 agreement is entitled
Joint Venture Agreement, but it also consistently refers to the
members as partners and to the entity as the Partnership. Unlike
the 1981 agreement, the 1982 agreement does not define
Partnership. The record contains no later organizing document
for Advances, and the parties refer to none, so we assume the
1982 agreement is the controlling document. It was largely the
same as the 1981 agreement; we will discuss differences in the
two agreements as necessary.
The parties dispute the nature and legal effect of
Advancess business form. We refer to the entity as a joint
venture, per the titles of the two joint venture agreements in
the record. Our usage is not meant to imply any legal or factual
distinction between the joint venture form and the partnership
form. We discuss that issue below. Both agreements stated that
the sole purpose of Advances was to acquire, develop, and manage
property for the production of income and profit. But it also
appears undisputed that, as the defendants alleged in the
superior court, the members specifically entered into the joint
venture agreement to construct a building to be used for
professional services.
The persons who were the original Advances joint
venturers were also the shareholders of a separate corporation,
Alaska Surgery Center, Inc., that was then operating an
ambulatory surgical center on Rhone Circle in Anchorage; that
surgery center had been in operation since approximately 1976.
Alaska Surgery Center, Inc. has been known by different names,
including Surgery Center, Inc. and Surgery Center. We refer to
it as Alaska Surgery Center, Inc., the name the corporation
adopted in 1983, or as Alaska Surgery Center for short. The
plaintiffs allege here, as did the defendants below, that the
joint venturers started the Advances joint venture primarily to
construct a new facility that could house a new ambulatory
surgery center.
As amended in 1982, AS 18.07.031 required anyone
intending to spend $1 million or more on the construction of a
health care facility to first obtain a certificate of need (CON)
from the Alaska Department of Health and Social Services (DHSS).2
In about 1982 Advances and Alaska Surgery Center, Inc. jointly
applied to DHSS for a CON to construct an ambulatory surgical
center on Laurel Street in Anchorage so Alaska Surgery Center
could relocate from Rhone Circle. Dr. Raymond Gills sent DHSS a
letter on behalf of Alaska Surgery Center, Inc., stating in part
that the space at Rhone Circle would no longer be used for
outpatient surgery once that space was vacated.
In February 1983 DHSS issued to both Alaska Surgery
Center, Inc. and Advances a CON for the construction of a new
facility and the relocation and expansion of the Surgery Center
. . . . The CON approved a maximum expenditure of $2,809,400 for
the new facility. Advances then constructed a new ambulatory
surgical facility in Condominium A of 4001 Laurel Street;
Advances was the owner of that condominium.
In late 1984 or early 1985 the individuals who were the
Alaska Surgery Center, Inc. shareholders (and who were also the
Advances joint venturers) sold a majority of their shares in
Alaska Surgery Center, Inc. to a health care operating company
called AlternaCare.3 At the same time, the Advances joint
venture negotiated a twenty-year lease with Alaska Surgery
Center, Inc. for Condominium A at 4001 Laurel Street. In effect,
the joint venture leased the space for the surgery center to
AlternaCare for twenty years. The joint venturers also entered
into a twenty-year non-competition agreement between themselves
and AlternaCare that prohibited Advances and the former
shareholders of Alaska Surgery Center, Inc. from directly or
indirectly engaging in the ambulatory surgery center business at
any location within a 25 mile radius of the current site of the
Center or within the Municipality of Anchorage, whichever is
smaller. The lease and the non-competition agreement both
expired in 2005.
The ownership of Alaska Surgery Center, Inc. changed,
and in 1996 HealthSouth acquired a majority interest in the
corporation. Around the same time, HealthSouth also acquired an
eleven percent interest in the Advances joint venture. Thus, by
the mid-nineties, the joint venturers included the six physicians
who are plaintiffs here and Dr. McGuire and HealthSouth.
When HealthSouth acquired the corporation in 1996,
Alaska Surgery Center, Inc. had approximately nine years
remaining on its Laurel Street lease with Advances. In June 1998
HealthSouth hired Dr. McGuire as a consultant to help relocate
the Alaska Surgery Center before its lease expired. After
plaintiffs filed suit in 2003, Dr. McGuire testified by
deposition that he believed that, to relocate the surgery center
from Laurel Street, HealthSouth would have to either build a new
facility for less than $1 million or apply for a new CON.
Because he believed at the time that getting a new CON would be
difficult, Dr. McGuire informed HealthSouth that the best and
most likely successful outcome would be legislative.
Therefore, around 1999, Dr. McGuire and HealthSouth
informed the other joint venturers that they intended to lobby
the Alaska legislature either to repeal the CON requirement or to
raise the CON threshold from $1 million to $7 million. The
plaintiffs later asserted in their complaint that they had no
objection to either of these proposed legislative changes.
In January 2000 a lobbyist hired by Dr. McGuire and
HealthSouth worked with legislators to introduce House Bill 297,
which proposed requiring CONs only for projects with proposed
costs exceeding $7 million. But the proposal to raise the CON
threshold met with opposition. By March 2000 the sponsor
statement for HB 297 indicated that the bill had been revised to
provide a solution to the immediate problem without raising the
$1,000,000 floor. The revised bill proposed allowing a health
care facility to relocate to a new site without obtaining a CON
as long as there was no increase in the services offered. As
revised, HB 297 proposed in part adding this subsection to AS
18.07.031:
(c) Notwithstanding (a) of this section, a
person who is lawfully operating a health
care facility that is an ambulatory surgical
facility at a site may make an expenditure of
any amount in order to relocate the services
of that facility to a new site in the same
community without obtaining a certificate of
need as long as neither the bed capacity nor
the number of categories of health services
provided at the new site is greater.
However, notwithstanding the expenditure
threshold in (a) of this section, a person
may not use the site from which the health
care facility relocated for another health
care facility unless authorized under a
certificate of need issued by the department.
The legislature enacted the bill as so revised; the governor
signed it into law in April 2000.4 The last sentence of the
subsection was deleted when subsection .031(c) was amended in
2004.5
In 2001 HealthSouth, relying on the new CON exception
created in 2000 by AS 18.08.031(c), relocated Alaska Surgery
Center from 4001 Laurel Street to the Lake Otis Professional
Center. Dr. McGuire, Louise Bjornstad, and HealthSouth each
acquired an ownership interest in Lake Otis Professional Center,
LLC, the company that owned the Lake Otis Professional Center.
HealthSouths lease of the Laurel Street facility did not expire
until 2005 and HealthSouth apparently continued to pay rent to
the Advances joint venture through the end of the lease. The
defendants assert that the Laurel Street surgery center space has
remained vacant since Advances regained possession when the lease
expired in 2005.
Five of the joint venturers sued Dr. McGuire,
HealthSouth, Louise Bjornstad, Alaska Surgery Center, Inc.,
Alaska Surgery Center, Ltd., and Lake Otis Professional Center,
LLC in April 2003.6 Another plaintiff was added later. The six
plaintiffs are the appellants in the appellate caption. Their
March 2004 amended complaint asserted eight claims: (1) fraud by
intentional misrepresentation; (2) fraud by deception; (3)
negligent misrepresentation; (4) conversion; (5) conspiracy to
commit fraud; (6) breach of fiduciary duty; (7) breach of
contract; and (8) economic duress.
The superior court granted complete summary judgment
for all the defendants in October 2006. The court concluded in
part that the plaintiffs had not demonstrated how choosing to
move rather than extending [the] lease breached any duty owed by
defendants McGuire and HealthSouth. The court then awarded all
of the defendants attorneys fees under Alaska Civil Rules 68 and
82.
The plaintiffs appeal.
III. DISCUSSION
A. Standard of Review
We review grants of summary judgment de novo, drawing
all factual inferences in favor of, and viewing the facts in the
light most favorable to, the non-prevailing party.7 Summary
judgment is appropriate if there is no genuine issue as to any
material fact and the prevailing party is entitled to judgment as
a matter of law.8 A party opposing summary judgment need not
prove that it will prevail at trial, but only that there is a
triable issue of fact.9 Any evidence sufficient to raise a
genuine issue of material fact, so long as it amounts to more
than a scintilla of contrary evidence, is sufficient to oppose
summary judgment.10
The applicability of a legal doctrine presents a
question of law to which we apply our independent judgment,
adopting the rule of law that is most persuasive in light of
precedent, reason, and policy.11 Questions of contract
interpretation generally raise questions of law that we review de
novo.12 Fact questions may be created if the meaning of the
contract language depends on conflicting extrinsic evidence.13
Summary judgment is inappropriate if there is an unresolved
material factual dispute about the intent of the contracting
parties.14 The parties expectations must be gleaned not only from
the contract language, but also from extrinsic evidence,
including evidence of the parties conduct, goals sought to be
accomplished, and surrounding circumstances when the contract was
negotiated.15
We review a superior courts award of attorneys fees for
an abuse of discretion.16 We will conclude there has been an
abuse of discretion if, after reviewing the whole record, we are
left with a definite and firm conviction that the superior court
erred in its ruling.17 Whether a superior court applied the law
correctly in awarding attorneys fees is a question of law that we
review de novo.18 We apply the independent standard of review in
deciding whether a superior court correctly determined a
settlement offers compliance with Rule 68.19
B. Whether It Was Error To Grant Summary Judgment to the
Joint Venturer Defendants on the Fiduciary Duty Claim
The plaintiffs argue that the superior court erred by
granting summary judgment to the two joint venturer defendants
(HealthSouth and Dr. McGuire) on the fiduciary duty claim.20 This
claim primarily concerns the joint venturer defendants role in
relocating the surgery center from the Laurel Street facility
owned by the joint venture to a facility not owned by the joint
venture at a time AS 18.07.031(c) effectively prevented operation
of a replacement surgery center at the Laurel Street address. The
plaintiffs contend that the joint venture agreement as written
imposed fiduciary duties relevant here. They also argue that
these genuine issues of material fact exist: (1) whether joint
venturers Dr. McGuire and HealthSouth owed the other joint
venturers a fiduciary duty; (2) whether Dr. McGuire and
HealthSouth breached that duty; and (3) whether the plaintiffs
suffered damages as a result.
1. The scope of Dr. McGuire and HealthSouths
fiduciary duties
The plaintiffs contend preliminarily that the joint
venture agreement created a fiduciary relationship and that the
joint venturers owed each other a duty to act without fraud or
deceit and with full disclosure at all times. They also argue
that there are genuine issues of material fact concerning the
scope of fiduciary duties owed by Dr. McGuire and HealthSouth.
Dr. McGuire and HealthSouth respond that Advances was a joint
venture, not a partnership, and assert that this distinction is
significant because the scope of duties owed between partners is
generally broader than that owed between joint venturers.
a. Whether the form of Advances matters
In granting summary judgment, the superior court noted
that the parties disagreed about whether partnership or joint
venture law determined the scope of fiduciary duties owed. The
superior court did not resolve this disagreement, having ruled
there was no breach of any fiduciary duty.
Because joint ventures and partnerships both involve
fiduciary relationships, the outcome of this appeal does not turn
on whether Advances was a partnership or a joint venture.21
Instead, the scope of any duties the members owed each other is
principally determined by the terms of the 1982 joint venture
agreement. We assume the 1982 agreement is the applicable
agreement. That is the agreement signed by Dr. McGuire, and no
one suggests any later joint venture agreement exists or applies.
That said, there seems to be little justification for
distinguishing between a partnership and a long-term joint
venture like Advances when determining the scope of fiduciary
duty owed. Advances was created primarily to construct the 4001
Laurel Street building and to own and manage the portion of the
building (Condominium A) containing a surgery center that would
generate long-term profits for the joint venturers. Advances is a
profit-sharing enterprise formed to facilitate not just a single
transaction or project relatively brief in duration, but rather a
long-term, and potentially lucrative, business arrangement.
Although we have indicated that fiduciary duties owed between
partners may often be broader than those owed between joint
venturers,22 we have been referred to no authority that would make
such a distinction relevant in this case.23
It also does not matter that, unlike the 1981
agreement, the 1982 amended agreement did not explicitly state
that general partnership law would apply to the extent the
agreement did not provide otherwise. The joint venture was a
form of partnership; the only question is whether the agreements
terms and purposes gave rise to or foreclosed particular
purported duties of loyalty and care.
Under Alaskas Uniform Partnership Act (UPA),24 the scope
of duties owed between partners is largely determined by the
partnership agreement.25 The UPA also governs relations between
and among partners [t]o the extent the partnership agreement does
not otherwise provide.26 According to AS 32.06.404, partners owe
each other the duties of loyalty and care.27 The duty of loyalty
requires a partner to refrain from competing in the conduct of
the partnership business and to account for any property, profit,
or benefit derived by the partner from the appropriation of a
partnership opportunity.28 A partner must discharge this duty and
any other duties under the partnership agreement and exercise any
rights in accordance with the obligation of good faith and fair
dealing.29 According to AS 32.06.960, the partnership agreement
may not completely eliminate the duty of loyalty, but may
identify specific types or categories of activities that do not
violate the duty of loyalty, if not manifestly unreasonable.30
To determine the scope of duties owed between the
Advances joint venturers, we must therefore first consider what
duties the joint venture agreement explicitly or implicitly
imposed on the members.
b. The terms of the agreement
The parties disagree about the extent of any fiduciary
duty owed under the 1982 joint venture agreement. Four
provisions in that agreement, sections 2.04, 2.05, 5.04, and
13.07, are particularly relevant.
The defendants argue that sections 2.05 and 13.07
demonstrate that the joint venturers specifically agreed to limit
their fiduciary duties, as former AS 32.05.130 legally entitled
them to do.31 The defendants appear to reason that sections 2.05
and 13.07 entitled Dr. McGuire and HealthSouth to deal with the
plaintiffs at arms length, unencumbered by any fiduciary duty, in
any matter involving Alaska Surgery Center, Inc. after its sale
in 1985.
Section 2.05, in effect, permitted members to compete
with the joint venture and among themselves, and states that
nothing shall deprive or otherwise affect the right of the
Partners to own, invest in, manage or operate property or to
conduct business activities which are competitive with the
business of the Partnership.
Section 13.07 authorized the individual joint venturers
to enter into transactions with Advances, and provides:
Transactions Between the Partnership and a
Partner. Any Partner may deal with the
Partnership other than in his capacity as a
member of such Partnership, and any such
transaction shall be considered as occurring
between the Partnership and one who is not a
Partner. Any such transaction(s) shall be
governed by such terms and conditions and
shall be based on such compensation and
commissions as may be agreed between the
Partner so dealing with the Partnership
acting through the Executive Committee.
The plaintiffs implicitly contend that section 13.07
was intended to permit a joint venturer to deal at arms length
with Advances when leasing office space in the Laurel Street
facility.32 They also argue that nothing in section 2.05, which
permits members to compete with Advances and the other members,
implies a complete waiver of all fiduciary duties.
We conclude that the defendants analysis of the
agreements limiting effect on fiduciary duty is incorrect. They
correctly contend that sections 2.05 and 13.07 allow joint
venturers to compete with Advances and conduct business with
Advances as if they were at arms length. But those provisions
did not expressly or implicitly relieve Dr. McGuire and
HealthSouth of every fiduciary obligation they might otherwise
owe with respect to the ownership and management of the joint
ventures Laurel Street property. Indeed, to the extent the
fiduciary violations alleged by the plaintiffs do not involve
either competing with or dealing at arms length with the joint
venture, sections 2.05 and 13.07 do not apply.
The plaintiffs contend that section 5.04 of the joint
venture agreement confirms that the members of Advances owed a
fiduciary duty to act without fraud and deceit and with full
disclosure at all times. They also argue that section 5.04
prohibited the joint venturers from doing anything that would
effectively prevent Advances from carrying on its business, which
they assert was to lease a majority of the space at the Laurel
Street facility [for use] as a surgery center.
Section 5.04, in effect, prohibits members from
engaging in unconsented activities detrimental to the joint
ventures best interests. It states in part that a member cannot,
without the consent of the Majority-in-Interest of the Partners,
do any act that would be detrimental to the best interests of the
Partnership or otherwise make it impossible to carry on the
business of the Partnership.33
The superior court implicitly determined that section
2.04 defined the extent of Advancess purpose and, by extension,
the extent of any fiduciary duty owed under section 5.04. The
superior court concluded that, per section 2.04, the purpose of
Advances was specifically limited to the acquisition of real
property and the development, leasing, sale, operation and
management of the real property. The court seemingly reasoned
that the business of the joint venture was not leasing a surgery
center, but rather generally owning and managing real property.
Section 2.04, which defines the purpose and character
of the Advances business, provides that:
[t]he sole purpose of the Partnership shall
be limited to (i) the acquisition of real
property listed in Exhibit A hereof
(Property) and all personal property used in
connection with the operation of the Property
and improvements thereof; and (ii) the
development, leasing, sale, operation and
management of the Property, improvements
thereon, and said personal property for the
production of income and profit.[34]
In short, section 2.04 states that the sole purpose of
the joint venture is to manage real property for the production
of income and profit. Defendants point to no evidence permitting
a finding that there was no such purpose. Given this express
purpose, we conclude that section 5.04 imposed a fiduciary duty
on the joint venturers to avoid gravely harming the income-
earning capacity of the joint venture. That duty was potentially
relevant here. We consequently conclude the agreements terms
imposed actionable fiduciary duties on the members, without
regard to whether extrinsic evidence would permit defining those
duties more broadly.
The plaintiffs also argue that the superior court erred
by limiting [its] review to the terms of the partnership
agreement. They contend that the court also should have
considered extrinsic evidence and the circumstances surrounding
the formation and conduct of the partnership. The plaintiffs
argue that the court should have considered that: (1) when
Advances was formed, the joint venturers were all practicing
physicians who owned and operated Alaska Surgery Center, Inc.;
(2) Advances applied for the 1983 CON together with Alaska
Surgery Center, Inc.; and (3) Advancess primary business for
twenty years was leasing out most of the Laurel Street facility
for use as a surgery center.
We agree with the plaintiffs that the text of the joint
venture agreement is not necessarily dispositive when determining
the purpose of the joint venture. As the plaintiffs argue, in
determining the meaning of an agreement courts should consider,
in addition to its text, relevant extrinsic evidence, including
the subsequent conduct of the parties.35 Courts may consult
extrinsic evidence without first finding that an agreements words
are ambiguous.36
We conclude that the record contains evidence that
would permit an inference that the purpose of the joint venture
was broader than the superior court found from the agreements
text. For example, the joint venture was formed by a group of
health care professionals who then owned and operated the Rhone
Circle surgery center. After Advances acquired the Laurel Street
property, the joint venture and a new corporation jointly applied
to DHSS for a CON to construct a new, apparently larger, health
care facility on Laurel Street into which the Alaska Surgery
Center would be moved. The joint venture received the surgery
center lease payments for at least twenty years. And although
the surgery center itself was sold in 1985, it was sold when no
statute permitted the surgery center to be relocated unless a new
CON was obtained for the new location. A fact finder might
therefore find that even though the current lease expired in
2005, given the relative difficulty of obtaining a CON, it was
reasonable for the joint venture to expect that the Laurel Street
facility would continue to operate as a surgery center beyond
2005 and would continue to generate commensurate lease payments.
It cannot be said as a matter of law that the joint venture had
no purpose of receiving those payments after 2005 just because
the current lease was to expire in 2005. It could be inferred
that Advances was formed not merely to manage real property at
4001 Laurel Street, but with the specific purpose of (1)
providing space to be leased for long-term use as the new (post-
Rhone Circle) ambulatory surgical center and (2) sharing
substantial profits from that use. The evidence suggests that
the joint venture had a purpose of leasing real estate for use as
a surgery center, or at least owning a facility that would
generate the sort of revenue to be earned by leasing to a surgery
center.
Therefore, even given a narrow reading of what the
agreement said about the purpose of Advances, it cannot be said
as a matter of law that the joint venture had no purpose giving
rise to a fiduciary duty relevant here. And extrinsic evidence
that the purposes may have specifically included leasing the
space for use as a surgery center creates a genuine fact dispute
that forecloses complete summary judgment on the duty issue. It
will be necessary on remand to consider extrinsic evidence
relevant to the joint ventures purposes. Those purposes will
determine what the joint venturer defendants could permissibly do
(such as competing, as expressly authorized by section 2.05) and
could not do (such as any act that was detrimental to the joint
venture or that made it impossible for the joint venture to carry
out its business, as expressly prohibited by section 5.04).
2. The alleged breaches of fiduciary duties
a. Relocation of the surgery center
The plaintiffs argue that the superior court erred in
granting summary judgment on the issue whether the two joint
venturer defendants breached their fiduciary duties. The
plaintiffs contend in part that there are triable issues whether
those defendants breached their fiduciary duties by destroying
[the joint ventures] right to continue leasing the Laurel Street
facility as a competing surgery center.
Whether there was a breach depends in part on what
duties were owed. Given what we said above about those duties,
there is a genuine issue of material fact about whether Dr.
McGuire and HealthSouth breached their fiduciary duties when they
moved the surgery center from Laurel Street to Lake Otis. If
Advances had a purpose of maximizing the rent at Laurel Street or
a more specific purpose of receiving rent from a surgery center
into the indefinite future, there is a genuine dispute about
whether the conduct of the joint venturer defendants breached
their fiduciary duties by violating section 5.04.
We are unpersuaded that either section 2.05 or section
13.07 has any application to the relocation dispute. Section
2.05 would have permitted the defendants to open a brand new
surgery center in competition with the existing surgery center;
doing so therefore could not, by itself, have been a breach of
fiduciary duty. But the relocation was not an act of
competition, and indeed effectively prevented the joint venture
from competing with the relocated surgery center. Relocation
prevented the joint venture from replacing the surgery center at
the Laurel Street facility, because AS 18.07.031(c), even as
amended in 2004, prohibited Advances from establishing a surgery
center there unless it either obtained a new CON or spent less
than $1 million on the replacement center.37
The evidence permits an inference that neither of those
options was feasible. There was evidence the Alaska Surgery
Center operated six surgical suites at the Laurel Street facility
before it relocated. And there was evidence that although the
joint venture might be able to re-equip and reopen a two-suite
surgery center for under $1 million, there was no way that [it]
could get six rooms, even buying used equipment . . . . There
was also evidence suggesting that DHSS was unlikely to issue
Advances a CON to reestablish a surgery center at Laurel Street.
Dr. Nathanson stated in a 2006 affidavit that Advances was being
told that it is not likely another CON will be issued in the near
future for an ambulatory surgery center in the Anchorage area.
It is also inferable that the defendants knew before
the relocation that it would be difficult to obtain a new CON for
a surgery center in Anchorage: Dr. McGuire recommended in the
late 1990s that HealthSouth pursue legislative changes that would
enable the Alaska Surgery Center to relocate without being issued
a new CON. Dr. McGuire testified in his deposition that he
believed getting a CON for the construction of a new surgery
center would be difficult and that legislative action presented
HealthSouths best and most likely successful outcome.
We therefore conclude that there is a triable issue as
to whether Dr. McGuire and HealthSouth breached their fiduciary
duties by relocating Alaska Surgery Center in 2001.
There may also be a triable issue about whether the
joint venturers consented to the relocation. The defendants
argue that the plaintiffs expressed agreement with HealthSouths
plan to seek legislation that would exempt it from obtaining a
CON before moving the surgery center. We interpret section 5.04
to mean that, if a majority-in-interest of the joint venturers
consented to relocating the Alaska Surgery Center, the relocation
would have breached no fiduciary duty.38
The superior court concluded that the plaintiffs
admitted that they approved the move.
The plaintiffs amended complaint stated that they did
not object to defendants plans to build a new ambulatory surgical
facility and to seek changes in the CON law. But that admission
is inferably qualified by the amended complaints related
allegation that the plaintiffs then understood that the
defendants were seeking to repeal the CON law or raise the CON
threshold. Neither of those changes would have prevented the
joint venture from recreating a surgery center after the
relocation proposed by the defendants. The plaintiffs did not
admit that they had consented, after AS 18.07.031 was amended in
2000, to a relocation that would effectively prevent Advances
from using or leasing the Laurel Street property as a surgery
center after the proposed relocation.
The plaintiffs argue that consent must be informed to
be meaningful in these contexts. They cite in support the Oregon
Supreme Courts decision in Starr v. International Realty, Ltd.39
In that case, partners in a real estate venture sued their fellow
partner to account for commissions he had received by acting as a
realtor without their consent.40 The Oregon Supreme Court
concluded that the consent required of the other partners was
informed consent with knowledge of the facts necessary to the
giving of an intelligent consent.41
We adopted the Starr consent standard in Wirum & Cash,
Architects v. Cash.42 We held there that [a] partner only
overcomes a breach of fiduciary duty if there is a full and
complete disclosure to the other partner and if the breaching
partner secures the other partners approval and consent.43 We
also concluded that the consent must be informed consent with
knowledge of facts necessary to an intelligent choice.44 That
standard applies here.
We accordingly conclude that a genuine issue of
material fact remains as to whether a majority-in-interest of the
joint venture consented to the relocation of Alaska Surgery
Center. It cannot be said as a matter of law that consent
expressed before the plaintiffs knew of the revisions to HB 297
was informed.
b. Misrepresentation
The plaintiffs argue that Dr. McGuire and HealthSouth
also breached their fiduciary duties by making misrepresentations
to David Pierce, the CON coordinator for DHSS, about the joint
ventures intentions. The superior court appears to have
dismissed the misrepresentation, deception, and conversion claims
because it had concluded plaintiffs had no property interest in
the CON or claim arising out of the transfer of the CON. What we
say elsewhere in this opinion in subpart a above and subpart c
below about the relocation and partnership property theories of
fiduciary duty breach also requires remand for consideration of
the misrepresentation theory.
Soon after HB 297 became law, Pierce sent an e-mail to
a HealthSouth representative congratulating HealthSouth on the
bills passage and instructing HealthSouth on how to expedite the
process for receiving a health care facility construction
license. Pierce asked HealthSouth to submit a letter of intent
provid[ing] a list of owners of the existing facility and their
signatures showing that they agree to close the existing facility
once the new facility is built.
Louise Bjornstad responded for HealthSouth with a
letter of intent addressing Pierces questions regarding Alaska
Surgery Centers relocation. Bjornstad did not list the names of
the Advances joint venturers or provide their signatures as
Pierce had requested. Although HealthSouth prepared a draft
signature page for the Advances joint venturers, the page was
never signed. Dr. Beal stated in his deposition that he had
never seen the page before.
Bjornstad stated in her letter to Pierce that [t]he
Laurel Street Building will [not be] leased or sold to any
individual or group intending to operate an ambulatory surgery
center. She further addressed Pierces request regarding the
future business of the Laurel Street facility in the following
way:
[AS 18.07.031(c)] clearly does not require
that the Laurel Street Building remain vacant
after the Surgery Center relocates.
Therefore, we do not understand how the
purpose of the statute would be served by the
agreement by the owners of the Laurel Street
Building that the[y] will close the existing
facility. Nothing in AS 18.07.031 prohibits
new uses of the Laurel Street Building that
do not require a certificate of need,
including health care related uses.
Dr. McGuire then sent an email to Pierce expressing
frustration about the CON determination process. Seemingly
referring to Pierces recent request for a letter of intent from
HealthSouth, Dr. McGuire remarked, [w]hy you would suppose that
you had the authority to demand that the exi[]sting facility be
CLOSED or that the owners of the facil[i]ty should sign a
document to that effect is beyond me!! You have caused
expenditures for attorneys fees that should never have been
required. Dr. McGuire further commented that Pierces recent
demands of HealthSouth were vindictive and prejudicial in light
of clear legislative intent that replacement projects be allowed
to proceed without interference from [Pierces] department.
The plaintiffs argue that HealthSouth and Dr. McGuire
breached their fiduciary duty when they resisted providing Pierce
the information he requested regarding the intentions of Advances
and misrepresented that the joint venturers intended to use the
Laurel Street building in a way that would not require a CON.
The plaintiffs also contend that Dr. McGuire and HealthSouth
breached their fiduciary duties by concealing: (1) the effect of
the 2000 amendment, (2) their role in the legislative process,
and (3) the misrepresentations they made to Pierce after the
legislation passed.
The defendants respond that there was nothing wrong
with HealthSouths representations to Pierce. But we conclude
that a fact finder could disagree. There appears to be a factual
dispute about whether the joint venture had no interest in using
the Laurel Street building for a surgery center, a use that would
require a CON, and thus either the existing 1983 CON or a new
CON. Bjornstads statement was therefore potentially incorrect.
The defendants communications with Pierce permit an inference
that they deliberately avoided involving the plaintiffs in their
CON approval process and actively discouraged DHSS from
contacting the other members of the joint venture. Based on the
plaintiffs present objections, had Pierce contacted the other
members, it is possible they would have stated that they intended
to continue renting or even intended to begin operating the
Laurel Street facility as a surgery center themselves and would
have objected to the relocation proposed by Health South. It is
also conceivable that news of such an intent or such an objection
would have affected Pierces determination. That Pierce asked for
the signatures of the Advances joint venturers is some evidence
he believed their consent was relevant to the process. We
therefore conclude that a genuine issue of material fact exists
as to whether Dr. McGuire and HealthSouths conduct amounted to a
breach of their fiduciary duties.
The defendants also contend, but very tersely, that
Bjornstads statements were constitutionally and legislatively
protected under both the First Amendment and the Noerr-Pennington
doctrine.45 The plaintiffs argue that Noerr-Pennington only
insulates an individuals petitioning activity from statutory-
based liability and does not extend to immunity to the breach of
contract and breach of fiduciary duty claims in this case.
The Noerr-Pennington doctrine evolved out of two United
States Supreme Court cases: Eastern R.R. Presidents Conference v.
Noerr Motor Freight, Inc.46 and United Mine Workers v. Pennington.47
The Court held in Noerr that the Sherman Act does not prohibit
two or more persons from associating together in an attempt to
persuade the legislature or the executive to take particular
action with respect to a law that would produce a restraint or a
monopoly.48 At least one court has expanded the doctrine to
insulate First Amendment petitioning activity from any cause of
action other than defamation.49
The superior court did not rule that the defendants
communications with Pierce were protected by the petition clause.
There may be unresolved factual disputes material to any
invocation of the petition clause regarding those communications.
There may be questions about whether any immunity has been lost.50
There may also be significant legal questions about whether the
right to petition is consistent with imposing liability for
concealing the petitioning activity and any alleged
misrepresentations from
a person to whom a fiduciary duty is owed. And the scope of the
Noerr-Pennington doctrine is in substantial legal dispute. We
therefore decline to resolve this unripe and under-briefed issue.
c. Misuse of partnership property
The plaintiffs argue that Dr. McGuire and HealthSouth
breached fiduciary duties by using partnership property without
consent. They allege that Advances acquired a valuable property
interest in the 1983 CON that the defendants then used to
relocate Alaska Surgery Center.
The superior courts summary judgment order rejected all
arguments premised on an assertion the CON was itself property or
conveyed any property right. The court concluded that the CON
was issued specifically for constructing, not operating, the
Laurel Street facility. It accordingly concluded that the CON
had ceased being a valid property interest when it expired on
February 15, 1985.
Arguing that the superior court erred in reaching this
conclusion, plaintiffs contend that the CON did not expire post-
construction because it conferred the right to use the facility
as a surgery center indefinitely, as long as the recipient
complied with the CONs terms. A contrary interpretation, they
argue, (1) would render meaningless the provisions of AS
18.07.081 that provide guidelines for when a CON may be revoked
due to the sponsors non-compliance with its terms,51 and (2) would
be inconsistent with the 1976 legislative mandate requiring all
health care facilities in existence or under construction before
July 1, 1976 to be issued a CON.52
The defendants respond that the CON is not a property
right but rather a means of tracking medical services available
within a community. They argue that, even if the CON is a
property right, the right attaches, not to a building, but to the
health care business that operates within it. They contend that
the CON in this case was always owned by Alaska Surgery Center,
Inc. and that any property right created by the issuance of the
CON belonged to Alaska Surgery Center, Inc., not Advances.
These arguments raise these issues: (1) whether issuing
a CON vests its sponsor with a property right that continues to
exist post-construction; (2) whether the joint venture had any
property interest in the operating rights granted by the 1983
CON; and (3) whether any such property interest still belonged to
Advances when the Alaska Surgery Center relocated in 2001. These
issues are presented even if the CON itself is deemed to have
expired when construction was completed.
Per AS 32.06.204, property acquired in the name of the
partnership is partnership property. Property is defined in AS
32.06.995(13) to include real, personal, mixed, tangible, or
intangible property, or an interest in property. (Emphasis
added.) Other jurisdictions have considered whether a CON
confers on its sponsor a property interest for due process
purposes and have held that it does. The Iowa Supreme Court has
acknowledged that the actual issuance of a certificate of need
conveys a property interest on the holder of the certificate.53
The Michigan Court of Appeals similarly held that, once granted,
a CON conveys a property interest on its holder.54 That court
specifically recognized that a certificate of need for future
hospital beds is a very valuable property interest, often worth
millions of dollars.55
At least one jurisdiction has held that the right
conferred by a CON is limited to the period of construction. The
Washington Court of Appeals held in Watkins v. Restorative Care
Center that a CON did not entitle the recipient nursing home to
continuously maintain 250 beds at the facility.56 That court held
that the CON merely conferred the right to expand the Center into
a 250-bed nursing home facility, a right which expired . . . when
construction of the Centers new building was completed.57
We have recognized that the public need for medical
facilities makes it essential that DHSS be able to regulate
health care facilities by way of the CON program.58 The
legislature adopted the CON program to avoid unnecessary
duplication of health care resources in any one geographical
area.59 We have recognized that granting a CON creates a type of
health care monopoly in the recipient medical facility.60 A CON
recipient is authorized to perform a category of health services
for an indefinite period of time as long as the recipient
complies with the terms of the CON. Per AS 18.07.041, subsequent
CONs authorizing the operation of competing facilities will only
be issued if DHSS determines that the availability and quality of
existing health care resources or the accessibility to those
resources is less than the current or projected requirement for
health services required to maintain the good health of citizens
of this state.
Given the difficulty of obtaining a CON, any enterprise
to which one is issued possesses a potentially valuable asset.61
The authority a CON confers is valuable because it assumes the
state will comply with the statutory scheme and restrict
competition. A CON confers the valuable right of complete or
partial exclusivity. It gives recipients a de facto monopoly
until DHSS decides to issue a CON to a competitor or until a
competitor can construct a facility at a cost that does not
require it to obtain a CON. The valuable right extends past the
period of construction and continues as long as the recipient
complies with the terms of the CON.
We also think it significant that, when it first
enacted the CON program in 1976, the legislature required all pre-
existing health care facilities, whether they were under
construction or not, to apply for a CON.62 This requirement
implies that a CON has importance that extends past the
completion of construction. It is also significant that AS
18.07.081 provides that a CON can be revoked if the sponsor fails
to provide the services authorized.63 This provision suggests the
CON has some continuing effect even after construction has been
completed. If, as the superior court concluded, the issuance of
the CON were unnecessary for a facilitys operation, post-
construction revocation of the CON would have no effect on the
facilitys continued ability to operate and therefore no deterrent
or remedial effect. We do not think this statutory
interpretation is consistent with legislative intent.
We accordingly hold that the issuance of a CON creates
a valuable property interest in the recipient and that the
exclusive authority created by the CON continues to exist post-
construction. The issuance of the CON in this case created
valuable rights that did not expire just because the construction
conditions were satisfied. To the extent the superior court
apparently reasoned that no such rights survived the completion
of construction, we disagree.
We additionally hold that it was error to conclude as a
matter of law that the CON expired on February 15, 1985.
Deposition testimony of David Pierce, quoted in the plaintiffs
superior court motion papers, might permit a finding that he
understood that if HealthSouth (or AlternaCare) had abandoned
Condominium A before the enactment of the 2000 amendments,
Advances could have operated a surgery center at Laurel Street
without obtaining a new CON. Pierces testimony permits an
inference that DHSS itself did not consider this CON to have
expired. It implies that it was DHSSs view that the issuance of
the CON for the Laurel Street facility gave the owners of that
facility some continuing rights even if the designated operator
quit or went out of business. The statutes then in effect did
not expressly provide that a CON expires when construction is
completed, and permit a conclusion to the contrary.64 More
importantly, even if the CON itself expired when construction
ended, the operating authority implicit in the issuance of the
CON must be distinguished at this stage of this case from the
constructional authority expressly granted by the CON. There is
no basis for thinking that this operating authority expired when
construction was completed. After all, the CON statute has a
purpose of preventing unwarranted competition, i.e., operation of
more facilities than are needed.
We next consider whether Advances had some property
interest in the operating rights granted by the 1983 CON, and
whether any such property interest still belonged to Advances by
the time the Alaska Surgery Center relocated in 2001.
Advances and Alaska Surgery Center, Inc. applied
together for the 1983 CON that authorized the construction and
operation of the Laurel Street facility. The defendants do not
dispute that the 1983 CON carried both Advance[s] and [Alaska
Surgery Center, Inc.s] names. The CON stated that it has been
determined that the Surgery Center, Inc. had met the
requirements. The CON itself named both applicants, without
identifying them as recipients or applicants.
When the CON was issued in 1983, the same individual
medical professionals owned both Advances (as joint venturers)
and Surgery Center, Inc. (as shareholders). Those individuals
sold their interest in the corporation, the entity operating the
surgery center, in late 1984 or early 1985 to AlternaCare;
HealthSouth ultimately acquired their interest. The documents
selling the center to AlternaCare did not mention sale or
transfer of the CON to AlternaCare, although they otherwise
listed everything AlternaCare was receiving, including the actual
license to operate the surgery center and the equipment needed to
run the center.
Nor did the sale of the shares and the license to
operate include Condominium A, the specific location for which
the CON was apparently sought and issued. When the sale to
AlternaCare took place, no statute authorized relocation of a
facility that required a CON. The relocation statute was not
enacted until 2000, some fifteen years later. We think the
record demonstrates that there is a genuine issue about whether
the issuance of the CON in 1983 gave Advances some continuing
property interest in the continued operation of the surgery
center at Laurel Street even after the 1985 sale to AlternaCare.
If Advances retained such an interest, any unconsented acts of
the joint venturer defendants in moving the center away from
Laurel Street potentially interfered with or misused joint
venture property rights. It was therefore error to grant summary
judgment for defendants on plaintiffs misuse-of-property claim.
We do not mean to imply that there is no dispute about
these propositions. Even though the stock sale agreement does
not explicitly mention that the authority granted under the 1983
CON was being transferred to AlternaCare (HealthSouths
predecessor-in-interest), it is arguable that the shareholders
intended to relinquish any inchoate authority granted them by the
issuance of the 1983 CON to continue to operate the Alaska
Surgery Center. The sales agreement does not seem to explicitly
retain in the shareholders any reversionary right in that
operation. But for purposes of this appeal, it is enough to note
that there are unresolved factual disputes that preclude summary
judgment on plaintiffs misuse-of-property claim.
d. The plaintiffs other arguments
The plaintiffs also argue that there are triable issues
about whether Dr. McGuire and HealthSouth breached their
fiduciary duties in other ways. The plaintiffs allege fraud,
deceit, failure to disclose, concealment, bad faith, and
profiting from a prohibited transaction connected with the
conduct of the partnership. Because the plaintiffs give only
cursory treatment to many of these claims, it is unclear whether
they add anything to plaintiffs fiduciary breach claim. But
because we are reversing and remanding as to that claim, the
plaintiffs may also pursue these subsidiary claims insofar as
they relate to the breach of fiduciary duty claim.
3. Liability of the Other Defendants
The plaintiffs argue that there is substantial evidence
in the record from which to infer that the remaining defendants
Bjornstad, Alaska Surgery Center, Alaska Surgery Center, Ltd.,
and Lake Otis Professional, LLC were liable for aiding and
abetting a breach of fiduciary duty because they knowingly
assisted the joint venturer defendants in breaching their
fiduciary duties. The plaintiffs cite Wirum & Cash, Architects
v. Cash as standing for the proposition that a person who
knowingly assists someone in breaching a fiduciary duty is liable
for the harm caused.65
We assume for discussions sake that a non-fiduciary may
be liable for aiding or abetting a breach of fiduciary duty. We
have stated that, under subsection 876(b) of the Restatement
(Second) of Torts, aiding and abetting liability occurs when the
actor knows that the others conduct constitutes a breach of duty
and gives substantial assistance or encouragement to the other.66
But plaintiffs have waived this argument. The amended
complaint did not claim aiding and abetting fiduciary breach.
Nor did the plaintiffs raise their aiding-and-abetting theory in
the superior court.
Moreover, the plaintiffs produced no facts
demonstrating that defendants Alaska Surgery Center, Inc., Alaska
Surgery Center, Ltd., and Lake Otis Professional, LLC gave
substantial assistance or encouragement in any way that aided Dr.
McGuire and HealthSouths alleged breaches.
We are also unpersuaded by the plaintiffs argument as
to Bjornstads liability. As a general principle an employee
cannot be held liable for the breach of a contract between the
employer and another party.67 An employee likewise may not be
held liable for his or her employers breach of fiduciary duty
with respect to a third party. Although an employee such as
Bjornstad may be held liable for damage caused by independently
tortious or malicious acts,68 there is no claim on appeal she
engaged in such acts.
We accordingly hold that the superior court did not err
in granting complete summary judgment for Bjornstad, Alaska
Surgery Center, Inc., Alaska Surgery Center, Ltd., and Lake Otis
Professional, LLC on all claims.
4. Whether it was error to find that there were no
damages
The superior court dismissed most of the claims partly
because it concluded that there were no damages. It appears to
have concluded that the only possible harm posed to Advances
originated from the language in the 2000 statutory amendment
providing that, notwithstanding the expenditure threshold in (a)
of this section, a person may not use the site from which the
health care facility relocated for another health care facility
unless authorized under a certificate of need issued by the
department.69 Because the legislature deleted this language when
it amended subsection .031(c) in 2004, the superior court may
have reasoned that the joint venture was thereafter in the same
position it would have been in before enactment of the 2000
amendment.70 The court found that HealthSouth continued to pay
the rent on the Laurel Street facility until its lease expired in
2005 and that the joint venture was thereafter free to do what it
wanted with the property.
The plaintiffs argue that they suffered damages because
Advances is no longer able to lease out the Laurel Street
facility as a surgery center or sell it to someone intending to
operate it as a surgery center. They contend that this lost
ability has substantially reduced the joint ventures income from
the property because Advances could otherwise have leased the
building at above-market rates.
The defendants respond that the joint ventures
inability to use the Laurel Street facility as a surgery center
has nothing to do with [HealthSouth] and Dr. McGuire and
everything to do with the business decision [the plaintiffs] made
to cash out by selling the surgery center in 1985. They contend
that the Laurel Street facility has remained vacant since
Advances regained possession in 2005 because it will now cost
more than the CON threshold limit to start up another surgery
center in the vacated space. Defendants also note that the lease
expired in 2005 and that all lease payments were made. They
therefore contend that Advances suffered no damages and that
Advances is in the same position it would have been had
HealthSouth simply shut down the facility in 2005 or waited until
2005 to relocate.
We conclude that there is a genuine factual question
about whether Advances has been damaged. The 2004 amendment to
AS 18.07.031(c) does not establish as a matter of law that
Advances was not damaged. Even as amended in 2004, the statute
did not allow Advances to construct a surgery center at Laurel
Street without obtaining a new CON unless the cost would not have
exceeded $1 million. The evidence permits an inference that
neither alternative was feasible. Moreover, the defendants
appear to concede that Advances is no longer able to house a
surgical center in the Laurel Street facility.
We concluded above that there is a material question of
fact about whether the joint venturer defendants breached their
fiduciary duties by relocating the Alaska Surgery Center from the
Laurel Street facility after AS 18.07.031 was amended in 2000.
We similarly hold that there is a triable issue about whether the
plaintiffs were damaged as a result of the relocation.
C. Attorneys Fees
The plaintiffs argue that the superior court erred in
awarding the defendants Civil Rule 68 and Civil Rule 82 attorneys
fees.
When the plaintiffs filed their original complaint in
April 2003, they were represented by the law firm of Landye
Bennett Blumstein LLP (LBB). In October 2003 the defendants
moved to disqualify LBB from representing the plaintiffs because
it had drafted the joint venture agreement for Advances, provided
guidance to Defendant McGuire about a CONs legal characteristics,
and advised Advances about the dispute between Drs. Beal and
McGuire. The superior court granted the disqualification motion
on November 13, 2003, concluding that LBB had engaged in the
prohibited conduct of both representing and bringing suit against
a client.
Before LBB was disqualified, defendants HealthSouth,
Bjornstad, Alaska Surgery Center, Inc., Alaska Surgery Center,
Ltd., and Lake Otis Professional Center, Inc. each made an offer
of judgment to each plaintiff. Dr. McGuire made an offer of
judgment to each plaintiff except Dr. Gills. Most of the offers
were made in June 2003, about two months after the plaintiffs
filed their first complaint. Each offer provided that:
Defendant . . . , pursuant to Alaska R. Civ.
P. 68 and AS 09.30.065, hereby offers to
allow entry of judgment for plaintiff . . .
in this action for $1.00, including interest,
costs and attorneys fees. This is an offer
of compromise only and is not to be construed
as an admission.
No plaintiff accepted these offers.
After granting complete summary judgment for the
defendants, the superior court awarded them attorneys fees under
both Rule 68 and Rule 82. Under Rule 82, it awarded defendants
full reasonable attorneys fees that the defendants incurred from
the commencement of the litigation until LBB was disqualified on
November 13, 2003. Under Rule 68, the court also determined that
each plaintiff, with one exception, was liable for seventy-five
percent of the full reasonable attorneys fees each defendant
incurred after November 13, 2003.71
1. The awards to HealthSouth and Dr. McGuire
Because we have reversed the grant of complete summary
judgment for defendants Dr. McGuire and HealthSouth and remanded
for further proceedings as to them, they are no longer prevailing
parties. We accordingly vacate their Rule 68 and Rule 82
attorneys fees awards.
2. Whether it was error to award both Rule 68 and
Rule 82 fees
The plaintiffs argue that the superior court erred by
awarding attorneys fees under both Rule 68 and Rule 82.
Alaska Statute 09.30.065, which codifies when Rule 68
awards may be granted, states that [a] party who receives
attorney fees under this section may not also receive attorney
fees under the Alaska Rules of Civil Procedure. A party may not
receive awards under both Rule 68 and Rule 82 even if those
awards correspond to different time periods within the same case.72
Because it was error to award the defendants fees under
both Rule 68 and Rule 82 in the same case, we vacate the fees
awards to the prevailing party defendants and remand for further
proceedings.73
3. Whether the Rule 68 offers of judgment were valid
The plaintiffs argue that we should reverse the Rule 68
awards because the offers of judgment were invalid. They contend
in part that the offers were unreasonable in both timing and
amount because the defendants made one dollar offers of judgment
thirty days after the litigation started as a tactical move to
benefit from the 75% clause in the rule and the statute. They
also argue that the offers did not refer to resolution of the
counterclaims brought by HealthSouth and Dr. McGuire and thus did
not clearly indicate that all claims between the parties would be
resolved if the offer were accepted. The defendants respond
that the offers explicitly offered to allow entry of judgment for
plaintiff and therefore clearly indicated that, if they were
accepted, all claims would be resolved in the plaintiffs favor.
Rule 68 provides for attorneys fees awards when a
prevailing litigant has offered to allow judgment to be entered
in complete satisfaction of the claim.74 If the case involves
multiple defendants and the judgment finally rendered is at least
ten percent less favorable to the offeree than the offer of
judgment, the prevailing litigant is entitled to Rule 68 fees.75
A prevailing party serving a successful offer of judgment within
sixty days after the date set for initial Rule 26 disclosures is
entitled to recover seventy-five percent of his or her reasonable
actual attorneys fees.76
Other courts have held that to obtain the protection
and benefit of enhanced attorneys fees, the offer of judgment
must be made in good faith with the goal of settling the case
rather than obtaining a larger attorneys fee award.77 Those
courts have suggested that, as a general rule, one dollar offers
of judgment do not satisfy that good-faith test.78
Although we have yet to adopt a similar good-faith test
for offers of judgment, we suggested in Lowell v. Hayes that a
Rule 68 offer of judgment may be invalid if the offer is
disingenuously low.79 We there observed that in Beattie v.
Thomas, the Nevada Supreme Court had identified four factors for
trial courts to consider in determining the validity of offers of
judgment.80 One of those factors was whether the offer was
reasonable and in good faith in both its timing and amount.81 But
because the plaintiff in Lowell did not claim the defendants
offer was unreasonable or made in bad faith, we did not need to
reach the issue in that case.82
The superior court here declined to apply the Lowell
dicta, concluding that the language of Rule 68 and A.S. 09.30.065
and the purposes of the rule and statute is best served by a
bright line rule rather than a determination under the Beattie
factors.
Even though a purpose of Rule 68 is to encourage
settlement and avoid protracted litigation, offers of judgment
made without any chance or expectation of eliciting acceptance or
negotiation do not accomplish the purposes behind the rule. The
offers of judgment in this case were for one dollar. Most of the
defendants served their individual offers of judgment before they
asserted their counterclaims.83 Their offers were nothing more
than tactical demands that plaintiffs dismiss their claims to
avoid exposure to Rule 68 fees awards. The amount offered was
effectively zero in what appears to be a good faith dispute
involving potentially substantial damages. In the context of
this case, these offers could not be considered valid offers of
settlement or compromise, or valid attempts to encourage
negotiation. They do not satisfy the Beattie factors.84 We
conclude that they were not valid Rule 68 offers of judgment, and
therefore reverse the Rule 68 fees awards.
We have held that Rule 68 implicitly requires that an
offer of judgment include all claims between the parties and be
capable of completely resolving the case by way of a final
judgment if accepted.85 The plaintiffs also argue that because
the offers did not explicitly indicate that the counterclaims
would be resolved if the offers were accepted, the offers of
judgment were not comprehensive.86 We do not need to reach this
argument, having decided that the offers were invalid for other
reasons.
Because the offers of judgment were invalid, we reverse
the Rule 68 attorneys fees awards.
4. Whether it was error to award enhanced Rule 82
attorneys fees for the period before LBB was
disqualified
The plaintiffs allege that it was unreasonable to award
all defendants full reasonable attorneys fees incurred before LBB
was disqualified. The defendants respond that the plaintiffs
persistent attempt to use the joint ventures counsel to sue the
defendants was per se vexatious, unreasonable, in bad faith and
utterly devoid of merit, and therefore mandated an enhanced
attorney fee award. (Internal quotations omitted.)
An award of full attorneys fees under Rule 82 can be
justified by the losing partys bad faith defense or vexatious
conduct.87 The reasons for awarding full attorneys fees must
generally be explained by the superior court.88
In holding the plaintiffs liable for the full attorneys
fees incurred by the defendants until LBBs disqualification, the
superior court reasoned that the plaintiffs had acted
unreasonably and in bad faith by retaining LBB despite promising
not to do so and by vigorously opposing Dr. McGuires motion to
disqualify LBB. The court additionally found that the plaintiffs
had sought to use joint venture funds to pay for LBBs services
and that virtually all of the litigation up until November 13,
2003 concerned whether LBBs representation of the plaintiffs was
proper.
The plaintiffs argue that they should not be held
responsible for their attorneys misconduct, especially given that
there has been no showing that their attorneys conduct tilted the
playing field against [the] defendants.
It does not matter whether the plaintiffs knew LBB
could not represent them or whether LBBs representation harmed
the joint venturer defendants. The record permits a conclusion
that LBBs improper representation required all of the defendants
to incur some unnecessary legal fees. Awarding full reasonable
attorneys fees until LBBs disqualification was therefore not an
abuse of discretion.
That still leaves open what fees were reasonably
incurred by which defendants, and why. We have vacated the Rule
82 awards to the joint venturer defendants, HealthSouth and Dr.
McGuire. But the superior court actually entered two separate
final judgments awarding fees, one jointly for defendants
Bjornstad, Alaska Surgery Center, Inc., Alaska Surgery Center,
Ltd., and HealthSouth, and the other jointly for Dr. McGuire and
Lake Otis Professional Center, LLC. So far as we can tell based
on the limited arguments on appeal on this issue, only the two
joint venturer defendants (Health South and Dr. McGuire) had a
valid basis for seeking disqualification of LBB as plaintiffs
counsel. The LBB dispute therefore would have been thoroughly
litigated even if the plaintiffs had not sued the other
defendants. We assume that because the other defendants were
also parties, the disqualification dispute required them to incur
some additional fees, apart from fees necessarily incurred by the
two joint venturer defendants in successfully challenging LBBs
representation. Separating out the other defendants incremental
fees incurred as a result of the disqualification dispute may be
difficult. It may also be a needless exercise if on remand the
two joint venturer defendants ultimately prevail and become
eligible to recover Rule 82 fees, including enhanced fees, and if
the court again enters two judgments for the two groups of
defendants jointly covered by each judgment. The superior court
in its discretion may wish to hold in abeyance the enhanced fee
issue.
Having vacated the Rule 68 awards to defendants
Bjornstad, Alaska Surgery Center, Inc., Alaska Surgery Center,
Ltd., and Lake Otis Professional Center, LLC, all of whom remain
prevailing parties, we remand for a redetermination of the Rule
82 fees to be awarded those defendants.89
IV. CONCLUSION
Because questions of material fact exist as to (1) what
fiduciary duties Dr. McGuire and HealthSouth owed the plaintiffs
and (2) whether the defendants breached those duties, we REVERSE
the grant of summary judgment on the fiduciary duty and contract
claims and REMAND for further proceedings. We AFFIRM the grant
of summary judgment as to defendants Louise Bjornstad, Alaska
Surgery Center, Inc., Alaska Surgery Center, Ltd., and Lake Otis
Professional Center, LLC.
Because Dr. McGuire and HealthSouth are no longer
prevailing parties, we VACATE their Rule 68 and Rule 82 attorneys
fees awards. Because the offers of judgment were invalid, we
REVERSE the Rule 68 attorneys fees awards to all defendants. We
VACATE the Rule 82 awards and REMAND for reconsideration of the
Rule 82 awards for the non-joint venturer defendants in light of
this opinion.
_______________________________
1 This description of the facts is taken from the
pleadings and materials filed by the parties on summary judgment.
Because the superior court entered summary judgment for the
defendants, we take all permissible factual inferences in favor
of the plaintiffs. In describing the facts in this fashion we
are not resolving possible factual disputes. To the extent that
there are factual disputes, they will have to be litigated in
accordance with the legal conclusions reached in this opinion.
2 Former AS 18.07.031 provided that:
(a) No person may make an expenditure of
$1,000,000 or more for any of the following
unless authorized under the terms of a
certificate of need issued by the office:
(1) construction of a health care
facility;
(2) alteration of the bed capacity of a
health care facility; or
(3) addition or elimination of a
category of health services provided by a
health care facility.
3 At the time of sale, the Advances joint venturers
included Drs. Beal, Chandler, Coles, McGuire, Nathanson, Norman,
Gills, and Sitter.
4 Ch. 18, 1, 2, SLA 2000.
5 Ch. 48, 1-3, SLA 2004.
6 The original complaint asserted that the role of Alaska
Surgery Center, Ltd. is unclear but that it relates to operation
of the Alaska Surgery Center.
7 Rockstad v. Erikson, 113 P.3d 1215, 1219 (Alaska 2005)
(citing Ellis v. City of Valdez, 686 P.2d 700, 702 (Alaska
1984)).
8 Id. at 1219 (citing Witt v. State, Dept of Corr., 75
P.3d 1030, 1033 (Alaska 2003)).
9 Indus. Commercial Elec., Inc. v. McLees, 101 P.3d 593,
597 (Alaska 2004) (citing Alaska Rent-A-Car, Inc. v. Ford Motor
Co., 526 P.2d 1136, 1139 (Alaska 1974)).
10 Maines v. Kenworth Alaska, Inc.,155 P.3d 318, 323
(Alaska 2007) (quoting Martech Constr. Co. v. Ogden Envtl.
Servs., Inc., 852 P.2d 1146, 1149 n.7 (Alaska 1993)) (internal
quotations omitted).
11 K & K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702,
724 n.66 (Alaska 2003) (citing Robles v. Shoreside Petroleum,
Inc., 29 P.3d 838, 841 (Alaska 2001)).
12 Norville v. Carr-Gottstein Foods Co., 84 P.3d 996, 1000
n.1 (Alaska 2004).
13 Id. (citing Alaska Diversified Contractors, Inc. v.
Lower Kuskokwim Sch. Dist., 778 P.2d 581, 584 (Alaska 1989)).
14 Monzingo v. Alaska Air Group, Inc., 112 P.3d 655, 659
(Alaska 2005) (quoting K & K Recycling, Inc., 80 P.3d at 712).
15 Neal & Co., Inc. v. Assn of Vill. Council Presidents
Regl Hous. Auth., 895 P.2d 497, 502 (Alaska 1995) (citing
Peterson v. Wirum, 625 P.2d 866, 870 & n.7 (Alaska 1981)).
16 Balough v. Fairbanks N. Star Borough, 995 P.2d 245, 254
(Alaska 2000) (citing Davila v. Davila, 908 P.2d 1027, 1031
(Alaska 1995)).
17 Id. (citing Buster v. Gale, 866 P.2d 837, 846 n.9
(Alaska 1994)).
18 Glamann v. Kirk, 29 P.3d 255, 259 (Alaska 2001) (citing
Philbin v. Matanuska-Susitna Borough, 991 P.2d 1263, 1266 (Alaska
1999)).
19 Ellison v. Plumbers & Steam Fitters Union Local 375,
118 P.3d 1070, 1073-74 (Alaska 2005) (citing Thomann v. Fouse, 93
P.3d 1048, 1050 (Alaska 2004)).
20 The plaintiffs also argue that the court erred by
granting summary judgment on their breach of contract claim. As
far as we can see from the briefing on appeal, the fiduciary duty
and contract claims are essentially coextensive. Although we do
not address the contract claim separately, we do not mean to
imply that the parties are foreclosed from litigating it on
remand.
21 Old Harbor Native Corp. v. Afognak Joint Venture, 30
P.3d 101, 106 (Alaska 2001) (citing Natl Soil Servs., Inc. v.
Hurst, 630 P.2d 3, 7 (Alaska 1981)); Mathis v. Meyeres, 574 P.2d
447, 449 (Alaska 1978) (partnership is fiduciary relationship);
see also Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928)
(refusing to allow party to take advantage of new business
opportunity without revealing full details to joint venturer).
22 Natl Soil Servs., 630 P.2d at 7 (citing Note, Apparent
Authority and the Joint Venture: Narrowing the Scope of Agency
Between Business Associates, 13 U.C. Davis L. Rev. 831, 857 n.132
(1980) (The scope of fiduciary duties owed between partners inter
se is often broader from that owed by joint venturers inter
se.)).
23 The defendants cite to the law review note which we
cited in National Soil Services. Note, supra note 22, at 857
n.132. That law review note stated:
While joint venturers, like partners, owe
each other a fiduciary duty as to matters
relating to the specific undertaking, or in
the formation of the association, the
fiduciary duty is less with respect to
outside and possibly competing interests. In
a partnership the fiduciary duty prevents any
competition by a partner with the partnership
business; in the joint venture it is
understood at the outset that the individual
business pursuits of the members are not thus
to be restricted by the mere union of the
parties in an isolated venture.
Id. (internal quotations and citations omitted) (emphasis added).
The plaintiffs fiduciary duty claim here primarily asserts
interference with or destruction of opportunities directly
related to the ownership and management of Condominium A.
Because the fiduciary breach alleged here relates to the primary
undertaking of the joint venture, any arguable justification for
distinguishing between joint venturer and partner fiduciary duty
would not apply here.
24 AS 32.06.201-.997.
25 AS 32.06.960 ([R]elations between and among the
partners and between the partners and the partnership are
governed by the partnership agreement.).
26 Id.
27 Although former AS 32.05 was in effect when the joint
venture was formed in 1981, we conclude that the current version
of the UPA, as codified in AS 32.06, applies to this dispute.
When it enacted AS 32.06 in 2000, the legislature stated that
[o]n or after January 1, 2004, secs. 1 - 7 of this Act apply to
all partnerships and limited liability partnerships. Ch. 115,
10, SLA 2000. The new act contained a savings clause that stated
the new UPA would not affect an action or proceeding begun or a
right accrued before January 1, 2001. Ch. 115, 11, SLA 2000.
The rights at issue in this case did not accrue before 2001, the
year in which the defendants relocated Alaska Surgery Center,
Inc. from 4001 Laurel Street to the new facility on Lake Otis.
The plaintiffs did not file their complaint until April 2003.
Because neither of these events occurred before January 1, 2001,
the savings clause does not apply in this case.
28 AS 32.06.404(b)(1) & (3).
29 AS 32.06.404(d).
30 AS 32.06.960(b)(3)(A).
31 Former AS 32.05.130 provided that [t]he rights and
duties of the partners in relation to the partnership shall be
determined, subject to any agreement between them, by the rules
outlined in that statute. (Emphasis added.) The equivalent
provision in the applicable version of the UPA is AS
32.06.960(a). It provides that relations between and among the
partners and between the partners and the partnership are
governed by the partnership agreement. To the extent the
partnership agreement does not otherwise provide, [AS 32.06]
governs relations between and among the partners and between the
partners and the partnership.
32 The plaintiffs also imply that the defendants did not
preserve their section 13.07 argument in the superior court.
Even though the defendants argue for the first time on appeal
that section 13.07 limits their fiduciary duties, this theory
closely relates to their properly preserved contention that
section 2.05 limited the duty owed. We therefore consider these
two theories together. See Sea Lion Corp. v. Air Logistics of
Alaska, Inc., 787 P.2d 109, 115 (Alaska 1990) (Arguments are
considered on appeal if raised explicitly in the superior court,
or if the issue is 1) not dependent on any new or controverted
facts; 2) closely related to the appellants trial court
arguments; and 3) could have been gleaned from the pleadings, or
if failure to address the issue would propagate plain error.
(quoting State v. Nw. Constr., Inc., 741 P.2d 235, 239 (Alaska
1987))).
33 The original joint venture agreement of 1981 defined
Partnership to mean joint venture. The 1982 agreement does not
define Partner or Partnership. The 1981 agreement also defined
Majority-in-Interest of the Partners to mean: one (1) or more of
the Partners who at the time are entitled to an aggregate of
seventy percent (70%) or more of the net profits and/or losses
then allocable to all Partners then living and not incompetent,
Bankrupt or Insolvent, pursuant to the provisions hereof.
Because each of the nine joint venturers had an equal ownership
share, the majority-in-interest was seven or more of the joint
venturers. The 1982 agreement defines Majority-in-Interest in
substantially similar terms.
34 We assume the term Property was intended in context to
refer either to 4001 Laurel Street or to Condominium A.
35 Leisnoi, Inc. v. Stratman, 956 P.2d 452, 454 (Alaska
1998) (citing Municipality of Anchorage v. Gentile, 922 P.2d 248,
256 (Alaska 1996)).
36 Id. at 454 (citing Gentile, 922 P.2d at 256 n.5).
37 AS 18.07.031(c).
38 Section 5.04 states that the joint venturers cannot,
without the consent of the Majority-in-Interest of the Partners
. . . (v) do any act detrimental to the best interests of the
Partnership; or (vi) do any act which would make it impossible to
carry on the business of the Partnership.
Per the joint venture agreement, any seven Advances
members together would be entitled to seventy percent of
Advancess profit and thereby be the joint ventures majority-in-
interest. For a definition of Majority-in-Interest of the
Partners, see note 33.
39 Starr v. Intl Realty, Ltd., 533 P.2d 165, 169 (Or.
1975).
40 Id. at 166-67.
41 Id. at 169 (internal quotations omitted).
42 Wirum & Cash, Architects v. Cash, 837 P.2d 692, 701
(Alaska 1992).
43 Id. at 701 (quoting Skone v. Quanco Farms, 68 Cal.
Rptr. 26, 29 (Cal. App. 1968)).
44 Id. (citing Starr, 533 P.2d at 168-69).
45 The plaintiffs argued in the superior court that Dr.
McGuire and HealthSouth were liable for attempting to influence
the legislative process. They have not renewed this argument on
appeal. There is consequently no need to consider whether the
superior court was correct in holding that the Noerr-Pennington
doctrine shielded the defendants from liability for seeking the
2000 legislative changes.
46 E. R.R. Presidents Conference v. Noerr Motor Freight,
Inc., 365 U.S. 127 (1961).
47 United Mine Workers v. Pennington, 381 U.S. 657 (1965).
48 Noerr, 365 U.S. at 136.
49 Azzar v. Primebank, FSB, 499 N.W.2d 793, 795-96 (Mich.
App. 1993) (holding that bank directors actions in successfully
petitioning Federal Home Loan Bank Board to oppose shareholders
attempt to acquire bank stock was attempt to influence
governmental action and immune from liability for breach of
fiduciary duty).
50 Cf. Gunderson v. Univ. of Alaska, Fairbanks, 902 P.2d
323, 329 (Alaska 1995) (quoting Liberty Lake Invs., Inc. v.
Magnuson, 12 F.3d 155, 158 (9th Cir. 1993)) (holding that
[a]llegations of fraud and misrepresentation in the judicial
process will only block Noerr-Pennington immunity when such
allegations go to the core of a lawsuits legitimacy ); see also
Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119 (3d Cir. 1999)
(stating that [w]hile we do not condone misrepresentations in a
judicial setting, neither will we deprive litigants of immunity
derived from the First Amendments right to petition the
government if the alleged misrepresentations do not affect the
core of the litigants . . . case).
51 AS 18.07.081(d) provides that a CON may be revoked if:
(1) the sponsor has not shown continuing
progress toward commencement of the
activities authorized under AS 18.07.041
or 18.07.043 after six months of
issuance;
(2) the applicant fails, without good cause,
to complete activities authorized by the
certificate;
(3) the sponsor fails to comply with the
provisions of this chapter or
regulations adopted under this chapter;
(4) the sponsor knowingly misrepresents a
material fact in obtaining the
certificate;
(5) the facts charged in an accusation filed
under (c) of this section are
established; or
(6) the sponsor fails to provide services
authorized by the terms of the
certificate.
52 Ch. 275, 4, SLA 1976.
53 Greenwood Manor v. Iowa Dept of Pub. Health, State
Health Facilities Council, 641 N.W.2d 823, 837 (Iowa 2002)
(holding that petitioning nursing facilities had failed to
demonstrate establishment of property interest in competitor
facilitys certificate of need application).
54 Downriver Nursing Assocs. v. Michigan Dept of Pub.
Health, 484 N.W.2d 748, 751 (Mich. App. 1992) (holding that state
did not deprive plaintiff of use of its property interest).
55 Id. at 751 (quoting Gulf Court Nursing Ctr. v. Dept of
Health & Rehabilitative Servs., 483 So. 2d 700, 708 (Fla. App.
1985)).
56 Watkins v. Restorative Care Ctr., 831 P.2d 1085, 1090
(Wash. App. 1992).
57 Id. at 1090 (emphasis in original).
58 Valley Hosp. Assn v. Mat-Su Coal. for Choice, 948 P.2d
963, 970 (Alaska 1997).
59 S. Cent. Health Planning & Dev., Inc. v. Commr of Dept
of Admin., 628 P.2d 551, 553 (Alaska 1981) (If there is a surplus
of similar facilities in the area there may be unnecessary
duplication of health resources.).
60 Valley Hosp., 948 P.2d at 970 (concluding that CON
program created type of health care monopoly in only hospital
serving Mat-Su Valley).
61 Dr. Nathanson stated in his 2006 affidavit that
Advances was being told that it is not likely another CON will be
issued in the near future for an ambulatory surgery center in the
Anchorage area. Dr. McGuire testified in his deposition that he
had recommended that HealthSouth pursue legislative change to the
law in the late nineties because he believed it would be
difficult to obtain a new CON.
62 Ch. 275, 4, SLA 1976.
63 AS 18.07.081(d)(6).
64 See, e.g., AS 18.07.081(d)(6).
65 Wirum & Cash, Architects v. Cash, 837 P.2d 692, 712
(Alaska 1992) (concluding that, because partner had entrusted his
wife to manage partnerships financial records, wife also owed
fiduciary duty to partnership).
66 Ellison v. Plumbers & Steam Fitters Union Local 375,
118 P.3d 1070, 1077 (Alaska 2005) (applying Restatement test to
claims against third parties for aiding and abetting
discrimination (quoting Restatement (Second) of Torts 876(b)
(1979))).
67 Rathke v. Corr. Corp. of America, Inc., 153 P.3d 303,
312 (Alaska 2007) (quoting Jones v. Cent. Peninsula Gen. Hosp.,
779 P.2d 783, 791 (Alaska 1989)); see also Domke v. Alyeska
Pipeline Serv. Co., 137 P.3d 295, 307 (Alaska 2006) (citing
Jensen v. Alaska Valuation Serv., Inc., 688 P.2d 161, 162-63
(Alaska 1984)) (recognizing that agents cannot be personally
liable for breach of contract if both their agency and identity
of principal are disclosed).
68 Jones, 779 P.2d at 791.
69 Ch. 18, 1-2, SLA 2000.
70 Ch. 48, 1-3, SLA 2004.
71 Because Dr. McGuire did not make a valid offer of
judgment to Dr. Gills, the court concluded that Dr. Gills would,
under Rule 82, be liable for only twenty percent of the attorneys
fees Dr. McGuire incurred after LBB was disqualified.
72 Ellison v. Plumbers & Steam Fitters Union Local 375,
118 P.3d 1070, 1078 (Alaska 2005) (vacating Rule 82 awards for
work performed before settlement offers were made while retaining
higher Rule 68 fees awards for work performed after settlement
offers).
73 The defendants argue that the Rule 68 and Rule 82 fees
awards correspond to entirely separate actions, because the
plaintiffs changed counsel, amended their complaint, and engaged
in more extensive discovery once the issue of LBBs
disqualification had been resolved. These circumstances do not
establish that there were two different cases. Nor are awards
under both rules necessary to hold plaintiffs responsible for
their vexatious conduct related to the inappropriate use of LBB.
74 Alaska R. Civ. P. 68.
75 AS 09.30.065; Alaska R. Civ. P. 68.
76 AS 09.30.065(a)(1); Alaska R. Civ. P. 68.
77 Warr v. Williamson, 195 S.W.3d 903, 904 (Ark. 2004);
Century 21 Today Inc., v. Tarrant, No. 240696, 2003 WL 22443624,
1 (Mich. App. 2003).
78 Warr, 195 S.W.3d at 907 (reversing Rule 68 fee award
based on defendants one dollar offer of judgment and stating that
to obtain protection and benefit of Rule 68, a defendant must
make a good faith offer, or in other words, an offer sufficient
to compel the plaintiff to reassess his or her case. It is
difficult to imagine any circumstances under which an offer of
one dollar would compel a plaintiff to seriously consider
settling a case); Century 21, 2003 WL 22443624 at 1 (holding
trial court did not err in declining to award defendants
attorneys fees based on one dollar offer of judgment and stating,
first, that where a party employs gamesmanship by making a de
minimis offer of judgment early in a case in the hopes of tacking
attorney fees to costs if successful at trial, and the partys
objective is not settlement and, second, that one dollar offer
has little if any chance of seriously opening negotiations or of
settling a case, it would be hard to construe it as genuine
attempt at settlement).
79 Lowell v. Hayes, 117 P.3d 745, 760 n.76 (Alaska 2005).
80 Id. (citing Beattie v. Thomas, 668 P.2d 268, 274 (Nev.
1983) (requiring courts evaluating validity of offers of judgment
to consider: (1) whether plaintiffs claim was brought in good
faith; (2) whether defendants offer of judgment was reasonable
and in good faith in both its timing and amount; (3) whether
plaintiffs decision to reject offer and proceed to trial was
grossly unreasonable or in bad faith; and (4) whether fees sought
by offeror are reasonable and justified in amount)).
81 Id.
82 Id.
83 The defendants served their offers of judgment between
June and October 2003. Although HealthSouth, Dr. McGuire, and
Alaska Surgery Center, Inc. had filed counterclaims before making
their offers, defendants Alaska Surgery Center, Ltd. and Louise
Bjornstad did not file their counterclaims until long after their
offer expired.
84 Beattie, 668 P.2d at 274; see Warr, 195 S.W.3d at 907.
85 Progressive Corp. v. Peter ex rel. Peter, 195 P.3d
1083, 1088 (Alaska 2008).
86 See Fernandes v. Portwine, 56 P.3d 1, 9 (Alaska 2002).
87 Municipality of Anchorage v. Anchorage Police Dept
Employees Assn, 839 P.2d 1080, 1091-92 (Alaska 1992) (quoting
State v. Univ. of Alaska, 624 P.2d 807, 817 (Alaska 1981)); see
Alaska R. Civ. P. 82(b)(3)(G).
88 Id. at 1092 (quoting Moses v. McGarvey, 614 P.2d 1363,
1368-69 (Alaska 1980)).
89 We also note that if the joint venture defendants are
not prevailing parties on remand, a Rule 82 award of partial fees
to the other defendants may raise allocation issues.
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