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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Rude v. Cook Inlet Region, Inc. (4/11/2014) sp-6887

Rude v. Cook Inlet Region, Inc. (4/11/2014) sp-6887

         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,  

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ROBERT W. RUDE,	                                       )  

HAROLD F. RUDOLPH,	                                    )  

and BRENDA NICOLI,                                     )  

                                                       )   Supreme Court Nos. S-14686/14775/14796  

         Appellants/Cross-Appellees,                   )  

                                                       )   Superior Court No. 3AN-10-09493 CI  


         v.	                                           )   O P I N I O N


                                                       )    No. 6887 - April 11, 2014

COOK INLET REGION, INC.,                               )


         Appellee/Cross-Appellant.                     )


                  Appeal from the Superior Court of the State of Alaska, Third  


                  Judicial District, Anchorage, William F. Morse, Judge.  

                  Appearances:            Fred       W.       Triem,        Petersburg,          for  


                  Appellants/Cross-Appellees.      Jahna   M.   Lindemuth   and  

                  Katherine E. Demarest, Dorsey & Whitney LLP, Anchorage,  


                  and William D. Temko, Munger, Tolles & Olson LLP, Los  


                  Angeles, California, for Appellee/Cross-Appellant.   

                  Before:  Fabe, Chief Justice, Winfree, Stowers, and Bolger,  

                  Justices.  [Maassen, Justice, not participating]  

                  BOLGER, Justice.  


                  Robert Rude and Harold Rudolph are shareholders and former directors of  


Cook Inlet Region, Inc. (CIRI).  They distributed a joint proxy solicitation in an attempt  


----------------------- Page 2-----------------------

to be elected to the CIRI board of directors at CIRI's 2010 annual meeting.  Rude and   

Rudolph   accumulated  over  one  quarter  of  the  total  outstanding  votes,  but  CIRI's  

Inspector of Election refused to allow them to cumulate their votes.  Thus, their votes  


were split evenly between the two of them and neither was seated.  We conclude that the  

language of this proxy form required the shareholders' votes to be equally distributed  

between Rude and Rudolph unless a shareholder indicated otherwise.  We therefore  


affirm the superior court's decision granting summary judgment in favor of CIRI on this  



                    CIRI cross-appeals, arguing that the superior court should have awarded  

attorney's  fees  under  Alaska  Civil  Rule  68,  as  well  as  sanctions  against  plaintiffs'  

counsel  under  Alaska  Civil  Rule  11.    We  conclude  that  the  superior  court  was  not  


required to order sanctions, but we remand for reconsideration  of the attorney's fee  




                    CIRI is an organization created under the Alaska Native Claims Settlement  


Act (ANCSA).  CIRI is governed by a 15-member board of directors, with the directors  


serving staggered three-year terms; five directors are elected every June at the annual  


meeting.    Since  1997,  CIRI  has  rotated  its  annual  meeting  between  three  locations:  


Anchorage, Kenai, and Puyallup, Washington.  The 2010 annual meeting was held in  


Puyallup.  For each election, the board chooses a slate of five recommended candidates  

for  whom  it  solicits  proxies.    Rude  and  Rudolph  are  CIRI  shareholders  and  former  

directors.    In  2010,  neither  Rude  nor  Rudolph  was  an  incumbent  director;  they  

distributed a joint proxy statement calling themselves the "R&R Alliance" (R&R).  

                    CIRI's 2010 election was coordinated and supervised by an Inspector of  

Election.  On June 3, 2010, two days before the June 5 annual meeting, CIRI sent a letter  


to the Inspector, urging him to find that the R&R proxy did not give Rude and Rudolph  

                                                             -2-                                                        6887

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authority to cumulate the votes they received.  Rudolph responded by sending his own       

letter to the Inspector.  In it, he withdrew his candidacy and asked that he and Rude be   

allowed to cumulate all of the R&R proxy votes, which amounted to 27% of the total,              

in Rude's favor.             The Inspector split the R&R votes evenly between Rude and Rudolph,     

and as a result neither was elected to the board.  

                       Rude, Rudolph, and Brenda Nicoli, on behalf of herself as well as a putative  


class of CIRI shareholders,  filed claims against CIRI challenging, among other things, 


the result and fairness of the 2010 board election.  They sought monetary damages as  


well as equitable relief.  CIRI moved for summary judgment on all claims, which the  


superior court granted.  The Shareholders now appeal the grant of summary judgment  

as to their election claims.  


                       There is also some relevant prior history between these parties.  CIRI sued  



Rude and others in Alaska Superior Court  in 2008.   There, Rude and his co-defendants  


raised several counterclaims that were similar to some of the claims they raise in this  

case.  The superior court granted summary judgment to CIRI in the 2008 case and this  

court affirmed that decision in 2012.2  

                       In  2009,  Rude  and  Rudolph  sent  CIRI  shareholders  four  mailers  in  an  

attempt to change certain stock alienability restrictions and to call a special meeting on  


six resolutions.  In December 2009, CIRI sued Rude and Rudolph in federal court for  


making materially false and misleading statements in the four mailers and for breaching  


confidentiality obligations.  Rude and Rudolph raised some of the same counterclaims  

that they had raised in the 2008 case, and the federal court found that their arguments  

were barred by res judicata.  

           1           We will refer to the appellants collectively as the "Shareholders."  

           2          Rude v. Cook Inlet Region, Inc. , 294 P.3d 76 (Alaska 2012).  

                                                                       -3-                                                                     6887  

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                   "Summary judgment is proper if there is no genuine factual dispute and the  

moving party is entitled to judgment as a matter of law."3  We review the superior court's  


                                                         We resolve questions of mootness using our  

grant of summary judgment de novo. 



independent judgment.              The application of Rule 68 is a question of law that we review  

            6                                          7                                             8 

de novo.   The award of attorney's fees  and Rule 11 attorney sanctions  are generally  

reviewed for abuse of discretion.  


         A.        Mootness  

                   "We refrain from deciding questions where the facts have rendered the legal  



issues moot.  A claim is moot if it has lost its character as a present, live controversy." 

The Shareholders raise several claims related to the fairness of the 2010 CIRI board  

election.  CIRI argues that these issues are now moot because the five board members  

who were elected in 2010 have now finished their terms.  The Shareholders respond that  


these issues are not moot because even though Rude cannot now serve during the 2010- 

2013 term, he should still be paid fees as if he had.  

         3        Anderson  v.  Alyeska  Pipeline  Serv.  Co. ,  234  P.3d  1282,  1286  (Alaska  


         4          Id.  

         5        Ahtna  Tene   Nené   v.   State,  Dep't  of  Fish  &  Game,  288  P.3d  452,  457  

(Alaska 2012).  

         6        Anderson , 234 P.3d at 1286.  

         7         Id.  

         8         Enders v. Parker , 125 P.3d 1027, 1031 (Alaska 2005).  

         9        Ahtna Tene Nené , 288 P.3d at 457 (internal quotation marks omitted).  

                                                           -4-                                                    6887

----------------------- Page 5-----------------------

                    Although the Shareholders have not previously raised this argument, it is  


a proper  response to CIRI's mootness claim.  The possibility of this compensation if the  


Shareholders prevail suggests that the controversy remains unsettled.  In addition, there  


is a reasonable argument that these election fairness claims are capable of repetition and  



evading appellate review.                   The policies that the Shareholders dispute, including the  


counting of proxies and the location of the annual meeting, apply on a recurring basis,  


and there is a reasonable potential that these claims will continually evade appellate  


review.  In addition, we need to decide these claims in order to decide the issue of  

attorney's fees.11  


          B.        The Cumulative Voting Issue  

                    The  first  claim  in  this  appeal  is  that  the  election  inspector  unlawfully  


refused to allow Rude to cumulate votes under the proxy he held with Rudolph.  In  


Alaska,  a  shareholder  has  the  right  to  cumulate  his  votes  unless  the  articles  of  


incorporation  provide  otherwise.                        For  ANCSA  corporations,  there  is  a  special  

regulation that provides:  "If action is to be taken on the election of directors and if the  


shareholders have cumulative voting rights, a proxy may confer discretionary authority  


                             13   This regulation implies that a proxy must explicitly "confer" the  

to cumulate votes."  


"discretionary authority to cumulate votes."   

          10        See Rude v. Cook Inlet Region, Inc., 294 P.3d 76, 87 (Alaska 2012).   

          11        Id.  at 88 ("[W]here the outcome of an otherwise moot claim may change  

the status of the prevailing party and thus an award of attorneys' fees, we reach the  


merits of that claim." (alterations and internal quotation marks omitted)).  

          12        AS 10.06.420(d).  

          13        3 Alaska Administrative Code (AAC) 08.335(g) (2013).  

                                                               -5-                                                         6887

----------------------- Page 6-----------------------


                    This implication is supported by a case from the Third Circuit Court of  


Appeals: "Whether a shareholder intends to authorize the proxyholder to cumulate votes  

for fewer than the authorized number of directors should be determined by examining  


                                            Delaware  cases  also  support  the  proposition  that  the  

the  proxy  form  itself." 


shareholder's intent should be determined from the language of the proxy.                                              

                    These authorities are consistent with the language of the election rules  


adopted  by  the  CIRI  Board  of  Directors.    The  CIRI  election  rules  do  not  explicitly  


require a proxy to authorize cumulative voting, but state:  "The plain words of the proxy  


shall control," and "[i]n general, the Inspector of Election shall not use evidence outside  


the proxy form itself."  The election rules give examples of the interpretation of a board  


proxy  that  suggest  that  a  shareholder's  votes  will  be  distributed  equally  among  the  

candidates named on the proxy form "unless the shareholder unambiguously directs  


another allocation." Finally, the rules specifically provide:  "In order to avoid misleading  


proxy solicitations, a candidate may not voluntarily withdraw his or her candidacy in  

order to make his or her votes available for another candidate."  


                    The language of the R&R proxy was fairly clear:  "If this proxy is signed  


and no specific direction is given, it will be voted for Robert W. Rude and Harold F.  


Rudolph."  The proxy continued:  "You may withhold authority to vote for one of [sic]  

          14        Heffner v. Union Nat'l Bank & Trust Co. , 639 F.2d 1011, 1015 (3rd Cir.  


          15        N. Fork Bancorp., Inc. v. Toal , 825 A.2d 860, 867-68 (Del. Ch. 2000) ("A                         

proxy  card  is  evidence  of  an  agent's  authority  to  vote  shares  owned  by  another.  

Therefore, to determine the extent of this grant of authority to the proxy holders, one  

must look to the language [of the proxy] to determine the nature and extent of the agency  


relationship created." (internal quotation marks and alterations omitted)); Blasius Indus.,  


Inc. v. Atlas Corp. , 564 A.2d 651, 668 (Del. Ch. 1988) ("[T]he administrative need for  


expedition and certainty are  such  that judges of election . . . are not to inquire into  


[stockholders'] intention except as expressed on the face of the proxy . . . .").  

                                                                -6-                                                         6887

----------------------- Page 7-----------------------

more  of  the  nominees  named  here  by  lining  through  or  otherwise  striking  out  the  


nominee's name."  The language of the proxy thus suggested that the shareholder's votes  


would be equally distributed between the candidates unless otherwise indicated on the  


face of the proxy.  Therefore, the election inspector properly voted the proxies equally  


for Rude and Rudolph.                  

          C.        The Meeting Location Issue  


                    The second claim in this appeal is that the Shareholders' participation at the  


2010 annual meeting was unfairly curtailed because the meeting was held in Washington  


state.  Under Alaska law, "[m]eetings of shareholders shall be held at a place inside or  

                                                                   17  The CIRI bylaws state:  "Meetings of the  

outside this state as provided in the bylaws."                                                             

shareholders shall be held at the principal office . . . or at such other place, either within  


or without the State of Alaska, as the Board of Directors may designate."  This claim is  


thus controlled by the general rule that corporate directors must exercise their duties "in  


good faith, in a manner the director reasonably believes to be in the best interests of the  


corporation, and with the care, including reasonable inquiry, that an ordinarily prudent  


person in a like position would use under similar circumstances."18  

                    In this case, there was a reasonable basis for the board's decision to hold  

its annual meeting in Washington state every third year.  Approximately 38.5% of CIRI  

shareholders reside outside Alaska.  The board could reasonably conclude that those  

shareholders would have greater potential access to a meeting held in Washington than  


          16        The Shareholders argue in passing that the election inspector did not have       

the power to decide not to allow Rude and Rudolph to cumulate votes.  However, CIRI   

correctly  points  out   that  its  bylaws  give  the  inspector  the  power  to  determine  "the  

validity and effect of proxies."  

          17        AS 10.06.405(a).  

          18        AS 10.06.450(b).  

                                                                -7-                                                         6887

----------------------- Page 8-----------------------

to a meeting held in Alaska. The superior court properly granted summary judgment for  


CIRI on this issue because the directors made a reasonable decision to hold the 2010  


annual meeting in Washington, a decision that was consistent with the corporate bylaws  


and the relevant statute.  

          D.        The Remaining Election Fairness Claims  

                    The Shareholders raise several additional election fairness claims.  They  

first  argue  that  the  board's  proxy  statement  did  not  disclose  that  the  election  was  


contested and that CIRI improperly excluded the independent candidates' names from  


CIRI's proxy. But we have previously held that the applicable regulations do not require  


the board to include independent candidates in the board's proxy statements.                                         

                    Rude and Rudolph also argue that CIRI's proxy did not allow voting on  


corporate resolutions submitted by independent candidates.                                   In 2010, however, the  

federal court found that this argument had been rejected on the merits by the superior  

court in the 2008 case.  In the 2008 case, the superior court ruled that "CIRI did not have  


to include [the independent candidates'] proposed resolution in its proxy."  We thus  

conclude  that  this  argument  is  barred  by  collateral  estoppel,  which  precludes  "the  

relitigation of issues actually determined in earlier proceedings."21  

                    The Shareholders also argue that CIRI's proxy form did not provide a blank  


space  in  its  proxy  to  allow  voting  for  write-in  candidates.    This  claim  is  factually  

inaccurate  because  the  board's  proxy  statement  did  have  a  blank  line  for  write-in  

          19       See Rude v. Cook Inlet Region, Inc.                   , 294 P.3d 76, 89-90 (Alaska 2012);  

Henrichs v. Chugach Alaska Corp. , 260 P.3d 1036, 1044 (Alaska 2011).  

          20       Nicoli did not join in this claim.  

          21       Latham v. Palin , 251 P.3d 341, 344 (Alaska 2011) (alteration omitted).  

                                                             -8-                                                       6887

----------------------- Page 9-----------------------

candidates.  We rejected this argument in the 2008 case,22 and it was also disposed of  

previously in the federal case.  


                   Finally, the Shareholders argue that CIRI unfairly required the independent  


candidates to pay for their own campaigns.  We conclude that this claim is waived due  

                               23  It also appears that this claim was previously raised and decided  

to inadequate briefing.                                 

in the 2008 case.24  

          E.       Attorney's Fees  

                   On January 5, 2011, CIRI  made timely Alaska Civil Rule 68 offers of  


judgment to each of the Shareholders in the amount of $1,500, "in resolution of all  

claims" and "inclusive of all interest, attorney's fees, and costs."  After judgment was  


entered in its favor, CIRI moved for attorney's fees under Civil Rules 68 and 82, and the  

superior court granted fees under Rule 82.  The Shareholders appeal the Rule 82 fee  


award.  CIRI cross-appeals the court's denial of Rule 68 fees.  CIRI also moved for  

sanctions under Rule 11, but the superior court denied that motion.  CIRI now cross- 

appeals that decision as well.  


                   When the superior court denied CIRI's request for attorney's fees under  

Rule 68, it reasoned that the offers of judgment that CIRI made to the Shareholders  


"were  too  low."    The  court's  order  appears  to  be  based  on  Beal  v.  McGuire                              and  


Anderson v. Alyeska Pipeline Service Co.                       In Beal this court held:  "Even though a  

          22       Rude , 294 P.3d at 92-93.  


                   See A.H. v. W.P., 896 P.2d 240, 243-44 (Alaska 1995).  

          24       Rude , 294 P.3d at 82.  

          25       216 P.3d 1154 (Alaska 2009).  

          26       234 P.3d 1282 (Alaska 2010).  

                                                           -9-                                                    6887

----------------------- Page 10-----------------------

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."27  We concluded that offers of judgment  


of one dollar each, where there were "potentially substantial damages," "could not be  


considered valid" for purposes of Rule 68.                           Later, in Anderson , we applied the Beal  

analysis  to  a  ten-dollar  offer:    "there  was  no  objectively  reasonable  prospect  that  

Anderson would accept ten dollars to settle her case - or that the offer would even start  


a dialogue that could lead to settlement - at that stage of the litigation."29  

                    We conclude that the offers in this case of $1,500 for each plaintiff were  


not too low to satisfy these precedents.   In  this case, the Shareholders' claims were  


particularly  weak.    Many  of  the  claims  were  barred  by  collateral  estoppel,  and  the  

Shareholders had plenty of time to conduct discovery to assess their claims before the  

offers were made.  


                    The Shareholders cite Gold Country Estates Preservation Group, Inc. v.  

Fairbanks North Star Borough30 for the proposition that a Rule 68 money offer is not  

appropriate where the relief being sought is equitable.  In that case, we noted "that a  


citizen   litigant's   claim   alleging   violation   of   the   Open   Meetings   Act,   with   no  


accompanying claim for monetary damages, is unlikely to be an appropriate vehicle for  


a Rule 68 offer."31  We reasoned that where there is no claim for monetary damages, "[a]  


          27        216 P.3d at 1178.

          28        Id.

       234 P.3d at 1289.  

          30        270 P.3d 787 (Alaska 2012).  

          31        Id. at 799.  

                                                              -10-                                                         6887

----------------------- Page 11-----------------------



Rule 68 offer of judgment serves no legitimate purpose."                                 Likewise, in Fernandes v.  


Portwine ,  this  court  rejected  a  Rule  68  offer  of  judgment  which  by  its  terms  

encompassed only the legal, and not the injunctive, claims made by the offeree.33                                         We  


held the "offer of judgment was not comprehensive, definite and unconditional; it did not  


encompass any of the equitable claims."                          

                    In this case, however, the Shareholders sought both monetary and equitable  

relief in their complaint.  The plaintiffs' damage claims were substantial - their prayer  

for relief requested monetary damages for CIRI's allegedly unfair election practices,  

punitive damages, unpaid directors' fees for Rude and Rudolph totaling over $200,000,  


and a money award to the putative class from a common fund.  So the $1,500 offers of  

judgment did serve the legitimate purpose of addressing the Shareholders' claim for  


damages.  And CIRI's offers were clearly worded to end the litigation by covering all the  

claims,  not  just  the  damage  claims.    Thus,  the  fact  that  the  Shareholders  were  also  

seeking equitable relief does not invalidate CIRI's offers.   


                    We conclude that we should remand this case to allow the superior court  


to reconsider CIRI's motion for Rule 68 attorney's fees.  In addition, the attorney's fees  


awarded to CIRI should be apportioned among the individual plaintiffs.                                         


                    When the superior court denied CIRI's motion for Rule 68 fees, the court  


                                                                           Some federal courts have opined that  

referred to Nicoli's motion for class certification. 

          32        Id.

          33        56 P.3d 1, 8-9 (Alaska 2002).

       Id. at 9.  

          35        See  Mills v. Hankla , 297 P.3d 158, 175 (Alaska 2013).  

          36        This circumstance does not affect the offers made to Rude and Rudolph  


                                                             -11-                                                       6887

----------------------- Page 12-----------------------


when a defendant makes a Rule 68 offer to a class representative before certification,  


"the named plaintiff will . . . find his fiduciary obligations to the putative class members  


pitted against his own self-interest."                        That is, the representative's personal interest in  


the  offer  conflicts  with  his  obligation  to  the  putative  class,  which  has  no  other  


representative at that stage in  the proceedings.  Nicoli may renew this argument on  



           F.        Rule 11 Sanctions  


                     The superior court denied CIRI's motion for Rule 11 sanctions against the  

shareholders' attorney, Fred Triem.  CIRI argued in its sanctions motion that Triem  

violated  Rule  11  by  filing  the  initial  complaint  and  several  postjudgment  motions.  


CIRI's argument is that the claims therein were clearly barred by collateral estoppel, and  


thus  Triem  was  in  violation  of  Rule  11's  requirement  that  legal  arguments  not  be  


frivolous.         But  CIRI  concedes:               "Even  where  Rule  11  has  been  violated,  entry  of  


because they did not assert any claim for class action relief.  

           37        McDowall v. Cogan               , 216 F.R.D. 46, 51 (E.D. N.Y. 2003);                        see also Weiss  

v. Regal Collections , 385 F.3d 337, 344 (3rd Cir. 2004) ("As sound as is Rule 68 when   

applied to individual plaintiffs, its application is strained when an offer of judgment is  

made to a class representative.").  



                     If the court decides that Rule 68 fees should not be awarded against Nicoli,  

then the Rule 82 award should be clarified to explain why the court awarded 30% rather  

than the usual 20% under the rule.  

                                                                 -12-                                                            6887

----------------------- Page 13-----------------------


sanctions in a particular case is left to the superior court's discretion."                                                                We conclude  


the superior court's decision not to impose sanctions was within its discretion.                                                                          

V.           CONCLUSION  


                         We AFFIRM the superior court's grant of summary judgment to CIRI as  


to all claims. We VACATE and REMAND the court's attorney's fee determination.  We  

AFFIRM the court's denial of Rule 11 sanctions.  

             39          See  Alaska R. Civ. P. 95(b) ("[A] court may . . . impose a fine . . . against                                              

any attorney who practices before it for failure to comply with" the Alaska Civil Rules.).     



                         See Enders v. Parker , 125 P.3d 1027, 1037 (Alaska 2005) (holding that  


because Rule 11 sanctions are not mandatory, trial court did not err in failing to impose  

them even where trial court made finding that party to be sanctioned lacked good faith).  

                                                                              -13-                                                                               6887  

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