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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Girdwood Mining Company v. Comsult LLC (7/3/2014) sp-6921

Girdwood Mining Company v. Comsult LLC (7/3/2014) sp-6921

         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, email  

                                                                                    

         corrections@appellate.courts.state.ak.us.  



                   THE SUPREME COURT OF THE STATE OF ALASKA  



GIRDWOOD MINING COMPANY,                              )  

                                                      )        Supreme Court Nos. S-14588/15037  

                           Appellant,                 )       (Consolidated)  

                                                      )  

         v.	                                          )        Superior Court No. 3AN-10-11956 CI  

                                                      )  

COMSULT LLC and RODGER                               )        O P I N I O N  

DAVIS,                                                )  

                                                      )       No. 6921 - July 3, 2014  

                           Appellees.                 )  

                                                      )  

                                                      )  

COMSULT LLC and RODGER                                )
  

DAVIS,                                                )
  

                                                      )
  

                           Appellants,                )
  

                                                      )
  

         v.                                           )
  

                                                      )
  

GIRDWOOD MINING COMPANY,                              )
  

                                                      )
  

                           Appellee.	                 )
  

                                                      )
  



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

                  Judicial District, Anchorage, Patrick J. McKay, Judge.  



                  Appearances:          William        D.     Artus,       Anchorage,         for  

                  Appellant/Appellee Girdwood Mining Company.  Michael R.  

                  Mills and Katherine E. Demarest, Dorsey & Whitney LLP,  

                  Anchorage,  for  Appellees/Appellants  Comsult  LLC  and  

                  Rodger Davis.  


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

                                                       

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

                          Bolger, Justices.  



                          FABE, Chief Justice.  



I.           INTRODUCTION  



                          A mining company contracted with a consultant to help the company obtain   



new capital investments.  The company later brought suit against the consultant, seeking   



declaratory judgment that the contract violated Alaska securities law, as well as equitable   



rescission of the contract and cancellation of shares of stock and royalty interests granted            



under the contract.  The superior court granted summary judgment to the consultant on  



                                                                                                                                 

two grounds:  (1) the company's suit was barred as a matter of law by AS 45.55.930(g),  



                                                                        

which provides that "[a] person who makes or engages in the performance of a contract  



                                                                               

in violation of [Alaska's securities law] . . . may not base a suit on the contract"; and (2)  



the company's suit was barred as a matter of law by res judicata in light of a prior suit  



                                 

instituted by the consultant against the company in which the company did not raise its  



                                                       

present claims defensively. We reverse the superior court's grant of summary judgment  



on both grounds.  



II.          FACTS AND PROCEEDINGS  



                          Girdwood Mining Company and Comsult LLC, a consulting company,  



                                                                                                                                                           

entered  into  two  agreements  in  August  2003:                                                   a  Management  Agreement  and  a  



Fundraising Agreement.  Under the Management Agreement, Comsult would provide  



management services for Girdwood Mining and in return would receive a retainer in the  



                   

form of a grant of stock plus regular cash payments.  Under the Fundraising Agreement,  



                                                                                                                                          

Comsult would bring new capital investment to Girdwood Mining and in return would  



                                                

receive royalty interests and stock.  For purposes of argument on the summary judgment  



                                                                       

motion practice in the superior court and in this appeal, the parties have assumed that the  



                                                                                 -2-                                                                          6921
  


----------------------- Page 3-----------------------

                                                                                              

Fundraising Agreement violated Alaska securities law in order to reach the other legal  



issues presented in this case.  Comsult has reserved the ability to argue in any further  



                                                                                                    

proceedings that the Fundraising Agreement did not violate Alaska securities law.  We  



therefore do not address that substantive issue in this appeal.  



                    After the business relationship between Girdwood Mining and Comsult  



                                             

soured, the parties executed a Memorandum of Understanding in July 2004 terminating  



                                                   

both prior agreements.  Under the Memorandum, Girdwood Mining was to compensate  



                                                                             

Comsult for its performance under the Management Agreement by issuing a promissory  



                                                                                               

note, and Girdwood Mining was to compensate Comsult for its performance under the  



                                                                                              

Fundraising Agreement by awarding Comsult 60,000 shares of stock and a one-percent  



precious-metals royalty.  In October 2007 Comsult sued Girdwood Mining, seeking  



                   

payment on the unpaid promissory note, and Girdwood Mining confessed judgment in  



February 2008.  Girdwood Mining did not argue as a defense to that suit that any of the  



agreements between Girdwood Mining and Comsult were illegal and unenforceable.  



                    The current case began in November 2009 when Girdwood Mining sued  

Comsult1  seeking  to  cancel  Comsult's  stock  and  royalty  interests  that  compensated  



                                                                                          

Comsult for the termination of the Fundraising Agreement under the Memorandum.  



                                                                                 

Girdwood Mining argued that the relevant portions of the agreements are illegal under  



                                                                                   

Alaska securities law and that they are therefore void and the interests granted thereunder  



are subject to rescission on equitable grounds.  



                                                                                         

                    The superior court granted summary judgment to Comsult on two grounds.  



                                                                                                              

The superior court held that AS 45.55.930(g), which provides that "[a] person who  



makes or engages in the performance of a contract in violation of [Alaska's securities  



          1  

                                                                 

                    Girdwood Mining also listed as a defendant Rodger Davis, the primary  

owner and manager of Comsult at the time.  For simplicity, this opinion refers to the  

defendants together as Comsult.  



                                                             -3-                                                           6921  


----------------------- Page 4-----------------------

                             

law] . . . may not base a suit on the contract," barred suit by Girdwood Mining in this  



 case.  The superior court also held that Girdwood Mining's claims in this case were  



barred   by   res   judicata   in   light   of   Girdwood   Mining's   failure   to   raise   similar  



                                                                                                    

 counterclaims or defenses in Comsult's suit against Girdwood Mining in 2007 and 2008.  



 Girdwood  Mining  appeals  the  superior  court's  grant  of  summary  judgment  on  both  

grounds.2  



III.          STANDARD OF REVIEW  



                                                                                                                                             

                          "We review rulings on motions for summary judgment de novo, 'reading  



the record in the light most favorable to the non-moving party and making all reasonable  



                            

inferences in its favor.'  A party is entitled to summary judgment only if there is no  



                                                                                                                                                                       3  

                            

genuine issue of material fact and if the party is entitled to judgment as a matter of law." 



                                                                                       

                          Whether Comsult was entitled to judgment as a matter of law in this case  



                                                                                                           

 depends  on  our  legal  interpretation  of  a  statute,  AS  45.55.930(g),  and  on  our  legal  



 determination  whether  Girdwood  Mining's  claims  in  this  case  were  barred  by  res  



judicata in light of Comsult's 2007 lawsuit.  We review de novo a superior court's  



                                                 4                                                                                                                    5  

                                                                                                                                                                         

interpretation of a statute  and its determination that a claim is barred by res judicata. 



             2             Because we reverse the superior court's grant of summary judgment, we     



need not address the other two issues presented for appeal: whether Girdwood Mining's    

rejection of a settlement offer by Comsult merited enhanced attorney's fees under Alaska   

 Civil Rule 68, and whether the superior court erred by denying Comsult's motion to                                             

 enforce Comsult's stock and royalty interests after Girdwood Mining decided to refuse                                                                  

to honor those interests unilaterally following its loss at summary judgment.  



             3             ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc., 322 P.3d  



 114, 122 (Alaska 2014) (citations omitted).  



             4             Cragle v. Gray, 206 P.3d 446, 449 (Alaska 2009).  



             5            Patrawke v. Liebes , 285 P.3d 268, 271 n.7 (Alaska 2012).  



                                                                                  -4-                                                                          6921
  


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

                                                                                              

                    "When applying the de novo standard of review, we apply our independent  



                                                 

judgment  to  questions  of  law,  adopting  the  rule  of  law  most  persuasive  in  light  of  

precedent, reason, and policy."6  



IV.       DISCUSSION  



          A.         Girdwood Mining's Suit Is Not Barred By AS 45.55.930(g).  



                    Alaska  Statute  45.55.930(g)  provides  that  "[a]  person  who  makes  or  



engages  in  the  performance  of  a  contract  in  violation  of  a  provision  of  [the  state  

                                                                         



securities laws] . . . or who acquires a purported right under the contract with knowledge  

                                                                                                            



of the facts by reason of which its making or performance is in violation, may not base  

                        



a suit on the contract."   



                                                                                                       

                     Girdwood  Mining,  an  issuer  of  securities,  sued  its  former  consultant,  



                                                                                                                 

Comsult, seeking a declaratory judgment that the consulting contract was illegal under  



                                                                   

Alaska securities law and seeking equitable rescission and cancellation of compensation  



                                                                              

under that contract on those grounds.  The superior court granted summary judgment to  



                                                                                                              

Comsult, holding that "the plain language" of AS 45.55.930(g) requires the conclusion  



                                                                                                         

that Girdwood Mining is barred from bringing this claim because the claim "is based on  



                                                                              

the contention that the [contract] violates Alaska's securities laws" and "is, therefore[,]  



                                                       7  

 'base[d]  .  .  .  on  the  contract[s].'  "     The  scope  of  AS  45.55.930(g)'s  base-no-suit  



provision is an issue of first impression in Alaska.  



                    We conclude that it was error for the superior court to rule that Girdwood  



Mining's  suit  was  barred  under  AS  45.55.930(g)  as  a  suit  "base[d]"  on  an  illegal  

                                          



contract.  As a matter of textual interpretation, to "base" a suit on a contract is to seek to  

                                                                           



          6          ConocoPhillips,  322  P.3d   at  122  (citation  omitted)  (internal  quotation  



marks omitted).  



          7         Third and fourth alterations in original.  



                                                                -5-                                                            6921  


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

vindicate legal rights established by the contract.  In other words, to base a suit on a  



                                                                                                  8  

contract is to seek relief on the basis of the contract's validity.   By contrast, a suit  



seeking to invalidate a contract as illegal and rescind compensation granted under the  



                                                                                                            

contract is not "base[d]" on the contract; it is based on the common law rules governing  



                                                                                                                  

illegal contracts and remedies.  A suit seeking to invalidate a contract seeks to vindicate  



                                                                   

legal rights established by the common law, not the illegal contract.  More generally, the  



                                                                                             9 

                                 

basis of any lawsuit, or that on which the suit ultimately rests,  is the source of law that 



                                                                                                      

creates the plaintiff's cause of action by establishing legal rights that might be vindicated  



in  court  if  abridged.    Accordingly,  AS  45.55.930(g)'s  base-no-suit  provision  bars  



lawsuits  that  seek  to  enforce  the  terms  of  a  contract  that  is  illegal  under  Alaska's  



                                              

securities law; it does not bar lawsuits that seek relief on the premise that a contract is  



illegal, and therefore unenforceable, under Alaska's securities law.  



                               

                    To  be  sure, a suit to invalidate an illegal contract requires the court to  



interpret  the  contract  in  order  to  determine  its  illegality  before  applying  the  extra- 



contractual principles governing the validity of illegal contracts and the availability of  



                               

remedies. Comsult would have us hold that any suit that involves interpreting a contract  



                                                                          

is "base[d]" on the contract.  But that rule would sweep too far.  It would make virtually  



                                                                                      

any cross-reference in a claim the "basis" of the lawsuit.  We conclude that the basis of  



          8         Insight Assets, Inc. v. Farias , 321 P.3d 1021, 1027 (Utah 2013) ("[A]n  



action is 'based upon' a contract under the statute if a party to the litigation assert[s] the  

                                                                                 

writing's enforceability as basis for recovery." (alterations in original) (quoting Hooban  

                

v. Unicity Int'l, Inc., 285 P.3d 766, 770 (Utah 2012) (internal quotation marks omitted)).  



          9         WEBSTER 'S NEW INTERNATIONAL DICTIONARY 225 (2d ed. 1960) (defining  



                                                                                                            

the verb "base" as "[t]o put on a base or basis; to found; to establish, as an argument or  

conclusion;  -  used  with  on  or  upon"  (italics  in  original));  see  also  BLACK 'S  LAW  

DICTIONARY 137 (5th ed. 1979) (defining the noun "base" to include the "[b]ottom,  

foundation, groundwork, that on which a thing rests").  



                                                               -6-                                                         6921
  


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

                                                  

a lawsuit is the source of law establishing the right one seeks to vindicate by instituting  

the suit.10  



                       Our holding is consistent with cases from the very few jurisdictions that  



                                                                                                                         

have  previously  addressed  this  question.    Most  cases  interpreting  a  base-no-suit  



                                                                                                                                  

provision of a securities statute involve a party suing to enforce the terms of the illegal  



                                                                                            

contract against another party to the contract; because suits to enforce rights created by  



contract are "base[d]" on the contract, courts uniformly hold such suits to be barred by  



                                                                                        11  

                                                                                                                             

the base-no-suit provisions of the securities statutes.                                     Few cases involve a party suing  



to declare a contract illegal under securities law or to seek rescission of compensation  



                                                   12  

paid under an illegal contract.                         



                                                                                                     

                       But some courts have held that such suits are not barred by the securities  



                                                                                                                                               13  

                                                                                       

statute.  For example, in Novelos Therapeutics, Inc. v. Kenmare Capital Partners, Ltd. ,  



                                                                                      

a corporation that had contracted with a consultant to assist the corporation in marketing  



           10          For this reason, we reject the conclusion of the federal bankruptcy court in                                   



In re Bonham , 229 B.R. 438 (Bankr. D. Alaska 1999), that AS 45.55.930(g) bars suits     

that "refer to the specific contractual terms" of a contract that is illegal under the Alaska   

securities law because such suits are "based" on the illegal contract, id. at 443.  The  

court's cursory analysis is an implausibly broad interpretation of the phrase "to base on."  

                                                                                                                                    



           11  

                                                                                                                             

                       See, e.g., Sec. Am., Inc. v. Rogers, 850 So. 2d 1252, 1258 (Ala. 2002);  

                                                                                                                  

Indus Partners, LLC v. Intelligroup, Inc. , 934 N.E.2d 264, 265-66 (Mass. App. 2010);  

                                                      

see also S & D Trading Acad., LLC v. AAFIS Inc., 336 F. App'x 443, 446-50 (5th Cir.  

2009) (applying Texas securities law); Sea Carriers Corp. v. Empire Programs, Inc., 488  

F.  Supp.  2d  375,  383-84  (S.D.N.Y.  2007)  (applying  Connecticut  securities  law);  

                     

Salamon v. CirTran Corp., No. 2:03-CV-787-75, 2005 WL 3132343, at *3 (D. Utah  

Nov. 22, 2005) (applying Utah securities law).  



           12  

                                                                                                                          

                       It is perhaps more common for parties to an illegal contract to simply cease  

                                  

performance under the contract and raise the defense of illegality if the other party to the  

contract sues to enforce its terms.  



           13         No. CIV. A. 00-1086, 2001 WL 893449 (Mass. Super. June 29, 2001).  



                                                                       -7-                                                               6921
  


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

securities later sought declaratory judgment that the contract was void for illegality under     

the state securities law and that no compensation was due under the contract.14                                          The  



                 

consultant counterclaimed for breach of the consulting contract and sought to enforce the  



             15 

                                                 

contract,       but the court held the consultant's counterclaim to be barred by the base-no- 



                                                                      

suit  provision  of  the  state  securities  law  and  granted  the  corporation  its  declaratory  

judgment. 16  



                    A second case is also instructive.  In Regional Properties, Inc. v. Financial  

                                             17  the Fifth Circuit held that an issuer of securities could  

& Real Estate Consulting Co.,                          



sue its consultant under Section 29(b) of the federal Securities Exchange Act to void a  



                                                                                       18  

                                                                                           This case does not speak  

consulting contract that violated the federal securities laws. 



as directly to the meaning of what it is to "base" a suit on a contract as does Novelos  



because   the   federal   statute   is   distinct   from   the   state   base-no-suit   prohibition.  



Section  29(b)  states:    "Every  contract  made  in  violation  of  [the  federal  securities  



                

laws] . . . and every contract . . . heretofore or hereafter made, the performance of which  



                                       

involves the violation of, or the continuance of any relationship or practice in violation  



                                                                                                            

of [the federal securities laws] . . . shall be void . . . as regards the rights of any person  



                                                            

who, in violation of any such provision, rule, or regulation, shall have made or engaged  



                                                                     19  

                                                                              Despite   the   differences   between  

in   the   performance   of   any   such   contract." 



          14        Id. at *1-3, 7.
  



          15        Id. at *7.
  



          16
       Id. at *8-10.  



          17        678 F.2d 552 (5th Cir. 1982).  



          18        Id. at 564.  



          19        15 U.S.C.  78cc(b) (2012).  



                                                              -8-                                                       6921
  


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

                                                                                                      

Section 29(b) and AS 45.55.930(g), Regional Properties supports the conclusion that a  



                                                                                                              

suit to declare the contract in this case illegal is not barred by statute because of the  



historical ties between the federal statute and the state statutes that it spawned:  State  



courts often cite the federal statute and cases interpreting it for guidance in construing  



                              20  

their securities acts.            



                    No  case  identified  by  us  or  by  the  parties  from  any  sister  jurisdiction  



                                                                                                            

interprets a similar base-no-suit provision of a state or federal securities statute to bar suit  



when an issuer of securities sues its own consultant to invalidate an illegal contract.  



                                                                                                          

                    Our holding is also consistent with the legislative intent behind the Alaska  



                          21  

                                                                                                   

securities statute.          Alaska modeled its base-no-suit provision on the Uniform Securities  



                                  22  

                                      The official commentary to the 2002 revision of that Uniform  

Act of 1956,  410(f).  



Act  (which  left  untouched  the  base-no-suit  provision)  states  that  "[the  base-no-suit  



                                                                                                                        23  

provision] . . . is intended to apply only to actions to enforce illegal contracts."                                          



          20        See, e.g., Indus Partners, LLC v. Intelligroup, Inc., 934 N.E.2d 264, 271   



(Mass. App. 2010).  



          21        Post-enactment legislative history is disfavored because "the views of a  

                                                                                                

subsequent Congress form a hazardous basis for inferring the intent of an earlier one."  

                                                              

Consumer  Prod.  Safety  Comm'n  v.  GTE  Sylvania,  Inc.,  447  U.S.  102,  117  (1980)  

(quoting United States v. Price, 361 U.S. 304, 313 (1960)).  But, as here, it can provide  

                                                                                                    

confirmation of past or current legislative preferences.  See EINER  ELHAUGE ,S                                     TATUTORY  



                                                                           

DEFAULT RULES : HOW TO  INTERPRET UNCLEAR LEGISLATION 117 (2008).  



          22         Compare  Uniform Securities Act of 1956,  410(f),                            with ch. 198,  310(f)  



SLA 1959 (enacting a strikingly similar base-no-suit provision that is codified today as   

AS 45.55.930(g)).  



          23        Uniform Securities Act of 2002,  509(k) cmt. 15 (emphasis added).  



                                                                -9-                                                         6921
  


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

                                                                                                                    

                      And our holding interprets the base-no-suit provision so that the statute  



                                           24  

                                               Just as issuers of securities may elect to defend against suits  

enacts a reasonable policy: 



seeking to enforce a contract by raising illegality under AS 45.55.930(g), so too may  



                                                                                                    

they affirmatively seek declaratory judgment as to illegality.  This parallelism was one  



                                                                                                                  

reason behind the recognition at common law of a cause of action to cancel an illegal  



              25 

                                                                              

contract.          And to hold that Girdwood Mining's suit is barred by AS 45.55.930(g) would  



                                                                                                                     26 

force a would-be plaintiff to forgo any judicial remedy and simply breach.                                               By contrast,  



our  holding  permits  orderly  unwinding  of  contractual  relationships  without  surprise  



nonperformance and provides an additional route for reducing legal uncertainty.  



                                                                                                   

                      Finally, Comsult argues that Girdwood Mining cannot possibly "recover"  



compensation already "paid" under the contract.  But Comsult conflates this issue -  



                                             

whether Girdwood Mining will ultimately prevail in its claims under the law of remedies  



                                                                                              

and equitable considerations - with the preliminary issue before us today:  whether this  



                                                                                           

suit is barred for being "base[d]" on an illegal contract.  Because it is unnecessary for us  



          

to do so at this stage in litigation, we decline to address the merits of Girdwood Mining's  



claims.  



           24         When deciding questions of law, such as interpreting the                                        meaning of a  



statute, we have repeatedly stated that "[o]ur duty is to adopt the rule of law that is most                        

persuasive in light of precedent, reason, and policy."                                 Guin v. Ha, 591 P.2d 1281, 1284   

n.6 (Alaska 1979); see also, e.g.                   , Heller v. State, Dep't of Revenue , 314 P.3d 69, 72-73   

(Alaska 2013).  



           25  

                             

                      See Beit v. Beit , 63 A.2d 161, 163 (Conn. 1948).  



           26  

                                                                                                         

                      This  is  exactly  what  seems  to  have  happened  in  this  case.    Girdwood  

                                                              

Mining first brought suit as a plaintiff to invalidate the allegedly illegal contract through  

                

a regular and open process superintended by the superior court.  But after the superior  

                                                                                                         

court granted summary judgment to Comsult on the ground that such a suit was barred  

                                                                                                              

by AS 45.55.930(g), Girdwood Mining decided to unilaterally cease to honor the royalty  

and stock interests granted under the Memorandum of Understanding.  



                                                                   -10-                                                             6921
  


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

          B.	       Girdwood  Mining's  Claims  In  This  Case  Are  Not  Barred  By  Res  

                                                       

                    Judicata .  



                    The doctrine of res judicata, or claim preclusion, "prevents a party from  

                                                                               



suing on a claim which has been previously litigated to a final judgment by that party . . .  

                          



and  precludes  the  assertion  by  such  parties  of  any  legal  theory,  cause  of  action,  or  

                                                  



                                                                                       27  

defense which could have been asserted in that action."                                    In order for a claim to be  



barred by res judicata, there must have been "(1) a final judgment on the merits, (2) from  

                                                                                                                        



a court of competent jurisdiction, (3) in a dispute between  the same parties (or their  

                                                                                                   

privies) about the same cause of action."28  

                                                                   



                    In its most common configuration, res judicata is invoked to bar claims by  

a plaintiff who has already litigated those same claims as a plaintiff in a prior case.29  But  



claim preclusion has a wider sweep than that.  For instance, res judicata can sometimes  

                                                                      



bar the plaintiff's claim in a second case where that plaintiff was a defendant in an earlier  

                                                                       



case and could have but failed to interpose the same counterclaim or defense in the first  

                                                   

       30   Even in this defensive configuration, a claim will be precluded only if all three  

case.                                                                                                                   



requirements above are met, including the requirement that the dispute be about "the  

                                                             



same cause of action."  



          27        McElroy v. Kennedy , 74 P.3d 903, 906 (Alaska 2003) (omission in original)  



(quoting Dixon v. Pouncy , 979 P.2d 520, 523 (Alaska 1999)) (internal quotation marks  

                                                                

omitted).  



          28	       Id.  



          29        See, e.g., RESTATEMENT (SECOND) OF JUDGMENTS  24(1) (1982) (defining  



claim preclusion in terms of plaintiffs and defendants without considering the possibility  

                                                                                                               

of a defendant in case one becoming a plaintiff in case two).  



          30        See Sengupta v. Univ. of Alaska, 21 P.3d 1240, 1251-53 (Alaska 2001).   

                           



                                                              -11-	                                                        6921
  


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

                                                                                                      

                    To determine whether two claims are "the same cause of action," we use  



                                                                                         

a transactional analysis, looking at similarities in underlying facts rather than similarities  



                              31                                                32 

in  the  legal  claims.             We  have  cited  with  approval                  the  Restatement  (Second)  of  



                                                         

Judgments  24(1), which establishes an expansive scope for res judicata that "includes  



                                                                                       

all rights of the plaintiff to remedies against the defendant with respect to all or any part  



                                                                                                                              33  

                                                              

of the transaction, or series of connected transactions, out of which the action arose." 



Whether a factual grouping constitutes a transaction is "to be determined pragmatically,  

                                                                                           



giving weight to such considerations as whether the facts are related  in time, space,  

                                                                                                               



origin,  or  motivation,  whether  they  form  a  convenient  trial  unit,  and  whether  their  



                

treatment as a unit conforms to the parties' expectations or business understanding or  

usage."34  



                    The two parties in the current case have faced each other in court before.  

                                             



Girdwood Mining and Comsult entered into two agreements:  a Management Agreement  



                                                                 

and a Fundraising Agreement.  The parties executed a Memorandum of Understanding  



                                                                     

terminating both prior agreements.  Under the Memorandum, Girdwood Mining was to  



                                                                                                 

compensate Comsult for its performance under the Management Agreement by issuing  



                                                                      

a  promissory  note,  and  Girdwood  Mining   was  to  compensate  Comsult  for  its  



          31        Angleton  v.  Cox ,  238  P.3d  610,  614  (Alaska  2010)  ("The  question  of  



whether the cause of action is the same does not rest on the legal theory asserted but  

                                                                                                               

rather  on  whether  the  claims  arise  out  of  the  same  transaction  -  the  same  set  of  

underlying facts."); McElroy , 74 P.3d at 906 ("With respect to the 'same cause of action'  

requirement, we employ a transactional analysis to determine what constitutes a cause  

of action barred from relitigation by res judicata." (italics in original)).  



          32        McElroy , 74 P.3d at 906 n.7.  



          33        RESTATEMENT (SECOND) OF JUDGMENTS  24(1).  



          34        McElroy , 74 P.3d at  908 (quoting RESTATEMENT (SECOND) OF JUDGMENTS  



 24(2)).  



                                                             - 12-                                                       6921
  


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

                                                                                                                       

performance under the Fundraising Agreement by awarding Comsult stock and a royalty  



                                                            

interest.    In  October  2007  Comsult  sued  Girdwood  Mining  for  payment  on  the  



                                                      

promissory  note,  and  Girdwood  Mining  confessed  judgment  in  February  2008.  



                                                                

Girdwood Mining did not raise a defense of illegality in that earlier case.  In the current  



case, instituted in 2009, Girdwood Mining sued Comsult to cancel Comsult's stock and  



                                                                       

royalty  interests  that  compensated  Comsult  for  the  termination  of  the  Fundraising  



                                                                                

Agreement under the Memorandum, arguing that the relevant portions of the agreements  



are illegal under Alaska securities law.  



                    The superior court granted summary judgment to Comsult, concluding that  



Girdwood Mining's claim in this  case  is barred by res judicata in light of the 2007  



             

lawsuit in which Girdwood Mining never raised its claim of illegality defensively when  



                                    

it confessed judgment in 2008.  The superior court concluded that the confession of  



                                                                                         

judgment was a final judgment from a court of competent jurisdiction and involved the  



same  parties  as  the  parties  to  the  present  litigation;  the  only  remaining  issue  was  



"whether the prior litigation and the instant case arose out of the same transaction or  



                                                                                   

series of connected transactions."  The superior court concluded that both cases  "were  



                               

based  on  Comsult  attempting  to  collect  or  protect  what  it  was  owed  under  the  



                                                                                                                  

 [Memorandum  of  Understanding],"  which  "was  a  complete  settlement  of  both  the  



Fundraising and Management Agreements," and that Girdwood Mining "could have  



                                                                        

challenged  the  validity  of  the  [Memorandum  of  Understanding]  and  the  underlying  



Fundraising Agreement during the prior litigation."  



                     Comsult  defends  the  superior  court's  grant  of  summary  judgment  and  



                                                                      

argues that Girdwood Mining's claims in this case are "inextricably linked" to the 2007  



                                                                                   

lawsuit because both arose out of the Memorandum of Understanding.  It further argues  



                                                  

that allowing Girdwood Mining to proceed with its claims in this case would impair its  



                                                                                                                          

rights established in the 2008 confession of judgment.  Girdwood Mining argues that its  



                                                               -13-                                                        6921
  


----------------------- Page 14-----------------------

                                                                                  

current suit and the 2008 confession of judgment are  "at best" only slightly related  



insofar  as  one  of  the  promissory  notes  at  issue  in  2008  was  referenced  in  the  



Memorandum of Understanding and that its current claim seeks to cancel another part  



of the Memorandum of Understanding.  



                   We  conclude  that  it  was  error  for  the  superior  court  to  conclude  that  



                                                                                   

Girdwood Mining's claims in this case are barred by res judicata.  The facts underlying  



                                                                     

Girdwood Mining's claims in this case are not so closely related to the facts underlying  



its foregone defenses or counterclaims in the 2007 case as to constitute the "same cause  



of action" under our transactional test.  The two suits involve almost entirely separate  



facts  relating  to  separate  deals.    The  promissory  note  at  issue  in  2007  was  for  



compensation  due  for  Comsult's  performance  under  the  Management  Agreement,  



whereby Comsult agreed to provide certain management services for Girdwood Mining.  



Those management services did not involve fundraising, and neither party has suggested  



that the Management Agreement was illegal under Alaska securities law.   



                    The   stock   and   royalty   interests   at   issue   in   the   present   case   were  



                      

compensation  due  for  Comsult's  performance  under  the  Fundraising  Agreement,  in  



                                                                                                        

which Comsult agreed to raise money for Girdwood Mining.  It is those services that are  



assumed for the purposes  of argument in this appeal to have been illegal.  The key  



                                           

underlying  facts  in  the  two  cases  are  different  and  involve  disputes  about  different  



                                                                                  

consideration for different services.  Comsult has never argued that the promissory note  



                                                      

(consideration for termination of the Management Agreement) and the stock and royalty  



                                                              

interests (consideration for termination of the Fundraising Agreement) were linked and  



                                                                                 

that settlement of both agreements was a precondition to termination of any individual  



                   

agreement.  Because the transactional facts are so distinct between the 2007 suit and the  



present case, Girdwood Mining's claims are not precluded.  



                                                            -14-                                                       6921
  


----------------------- Page 15-----------------------

                    Moreover, the specific contracts at issue in the present case and the 2007  

                                                                                                            



case are independent instruments.   Comsult's claim in 2007 was not that Girdwood  

                                                                                                   



Mining  had  breached  the  Memorandum  of  Understanding  but  rather  that  Girdwood  

                                                                  



Mining owed Comsult money under the individual promissory notes.  According to the  

                                                                            



Restatement (Second) of Judgments, "judgment can be obtained on any one or a number  

                                                                                                  



of [independent instruments] without affecting the right to maintain an action on the  

others."35  



                    The only shared fact between the two cases is that both the Management  

                                                                                     



Agreement and the Fundraising Agreement were terminated by the Memorandum of  



Understanding, which prescribed independent forms of compensation for performance  

                                                                     



under  the  separate  prior  agreements.    We  conclude  that  this  lone  shared  fact  is  not  

                                                                                                    



sufficient  to  trigger  the  doctrine  of  claim  preclusion  in  this  case,  when  the  other  

                                



transactional  facts  underlying  the  two  cases  are  otherwise  so  distinct.    Finality  and  

                                                                                                           36  To require  

judicial efficiency are the primary objectives of the doctrine of res judicata. 



Girdwood Mining to have brought its present claims defensively in 2007 would not  



                                                                           

advance the interest of judicial efficiency.  Rather, it would harm the important interest  



                                                                                                               

of preserving a litigant's freedom of action and unfairly require Girdwood Mining "to  



                                                                                                            

assert [its] claim in the forum or proceeding chosen by the plaintiff . . . [rather than]  

allow[] [it] to bring suit at a time and place of [its] own selection."37  



          35        RESTATEMENT (SECOND) OF JUDGMENTS  24 cmt. d.  



          36        Kent V. v. State, Dep't of Health & Soc. Servs. , 233                            P.3d 597, 600-01  



(Alaska 2010).  



          37        Sengupta v. Univ. of Alaska, 21 P.3d 1240, 1251 (Alaska 2001) (internal  

                                                                    

quotation marks and citation omitted).  



                                                            -15-                                                       6921
  


----------------------- Page 16-----------------------

V.     CONCLUSION  



             For these reasons, we REVERSE the superior court's grant of summary  



judgment to Comsult and REMAND for further proceedings consistent with this opinion.  



                                         -16-                                   6921
  

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