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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Brooks v. Horner (3/13/2015) sp-6988

Brooks v. Horner (3/13/2015) sp-6988

         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@akcourts.us.  



                  THE SUPREME COURT OF THE STATE OF ALASKA  



RONALD A. BROOKS, individually,   )
  

and on behalf of W.B.H. Corp., a                    )
       Supreme Court No. S-15341  

domestic corporation,                               )
  

                                                    )
       Superior Court No. 4FA-11-01845 CI  

                          Appellant,                )
  

                                                    )
       O P I N I O N  

                 v.                                 )  

                                                    )       No. 6988 - March 13, 2015  

JOANN E. HORNER, individually,                      )  

as officer and director of W.B.H. Corp.,)  

and as trustee and beneficiary of the               )  

GEORGE HORNER TRUST; the                            )  

GEORGE HORNER TRUST;                                )  

HELEN H. WARNER, individually                       )  

and as officer and director of W.B.H.               )  

Corp.; and John Does 1-3,                           )  

                                                    )  

                          Appellees.                )  

                                                    )  



                 Appeal  from  the  Superior  Court  of  the  State  of  Alaska,  

                 Fourth Judicial District, Fairbanks, Paul R. Lyle, Judge.  



                 Appearances:  James M. Hackett, Law Office of James M.  

                 Hackett,  Fairbanks,  for  Appellant.    James  D.  DeWitt  and  

                                             

                 Gary   A.   Zipkin,   Guess   &   Rudd,   P.C.,   Fairbanks,   for  

                 Appellees.  



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

                                                                   

                 Bolger, Justices.   



                 MAASSEN, Justice.  


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

I.        INTRODUCTION
  



                    This case arises from a dispute over the sale of a corporate asset during the  

                                                                                                                      



winding up of a closely held corporation.  Two of the shareholders successfully bid to  



purchase the asset; the other shareholder claims they failed to overcome their conflict of  



interest and prove that the transaction was just and reasonable as to the corporation.  



                                                     

Following trial, the superior court found in favor of the interested shareholders, in large  



                                                                                                 

part because the disinterested shareholder had voted to approve the transaction with full  



                                           

knowledge of the material facts.  The disinterested shareholder appeals.  We affirm,  



                                                                                           

concluding that the superior court did not clearly err in its findings of fact or err in its  



application of Alaska law and the corporation's bylaws.      



II.       FACTS AND PROCEEDINGS  



                                                       

                    Ronald Brooks was a director and one-third shareholder of W.B.H. Corp.,  



                                                                               

a closely held Alaska corporation formed in 1991.  The other two shareholder-directors  



                                                                 

were  Joann  Horner  and  Helen  Warner.    At  the  times  relevant  to  this  lawsuit,  the  



                                                               

corporation's sole asset was a group of contiguous mining claims north of Fairbanks  



                                                                                                                    

called Bittner Lode.  Despite the parties' agreement to share costs equally, Horner and  



                                                                                        

Warner for a number of years paid Brooks's share of the annual payments necessary to  



                                           1  

maintain the mineral leases.   By 2009 W.B.H. had no revenue, cash reserves of only  



$485, and accounts payable in excess of $85,000.  



                    At  the  annual  shareholders'  meeting  in  December  2009,  the  three  

                          



shareholders agreed that their best course was to dissolve the corporation and liquidate  

                                                                        



its  sole  asset.    They  discussed  the  corporation's  debts  and  the  anticipated  costs  of  



winding up, and they agreed that they would accept a minimum bid price of $100,000  

                                                                       



          1  

                                                                                                  

                    Under AS 38.05.210-.212, W.B.H. was required to perform labor, pay rent,  

and pay royalties on all minerals mined from land subject to its claims.  



                                                               - 2 -                                                            6988  


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

for Bittner Lode.  Horner and Warner proposed to set the bid deadline for March 31,  



                                                                         

2010, but Brooks pushed for a June date instead, arguing that bidders would need time  



in good weather conditions to inspect the claims.  Horner responded that a later sale  



                                                           

would  mean  another  year  of  upkeep  costs  for  the  cash-strapped  corporation,  and  



Brooks's motion failed to get a second.  Brooks then voted with Horner and Warner to  



                                                                                                         

dissolve the corporation and appoint Horner "to supervise and direct the winding up  



                                                                           

process," on the condition, unanimously accepted, that Horner have discretion to extend  



                                           

the bid opening by 45 days.  Brooks told Warner he was too busy to be involved in the  



                 2  

dissolution.   



                                                                             

                    After the meeting Horner and Warner approached Donald Keill, a mining  



                                                                                                                  

engineer,  about undertaking an advertising campaign to market Bittner Lode. On Keill's  



advice Horner decided to use the corporation's remaining cash reserves to develop a  



                                                                                

sales brochure and a compact disc containing the most recent geological data on the area  



                                                                                                   

around Bittner Lode.  Rather than advertise in mining periodicals, which they thought  



                                                     

would be too costly for the likely return in exposure, Horner and Warner attended a  



series of mining conventions between January and March 2010, where they distributed  



copies of their brochure.   



                    Meanwhile, John Burns, the corporation's attorney, drafted a confidentiality  



                                         

agreement and criteria for the submission of bids; these included a requirement that  



bidders show proof of financial pre-qualification by March 20, 2010, and a disclaimer  



          2         Brooks  denied  saying  this,  but  the  superior  court  believed  Warner's  



testimony that he did.  We defer to the superior court's credibility finding.  See Riggs v.  

                                                                                 

Coonradt, 335 P.3d 1103, 1107 (Alaska 2014) (noting that "the trial court, not this court,  

performs the function of judging the credibility of witnesses and weighing conflicting  

evidence" (internal quotation marks and citations omitted)).  



                                                             - 3 -                                                      6988
  


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

                                                                                                          

of corporate liability for inaccuracies in the data on the compact disc.  In February 2010  



Horner and Warner reviewed and approved these terms and conditions.  



                                                   

                    By early March the marketing campaign had drawn interest from only one  



                                                                                                        

prospective bidder, Johannes Halbertsma, who ultimately decided not to bid.  In late  



                                                                                                             

March Horner and Warner, fearing there would be no bids and anxious to complete the  



                                                                          

winding up process before enduring another year of upkeep costs, decided to submit their  



                                                                                     

own bid.  Their bid was $105,000 made in the name of the George Horner Trust/Helen  



                                                      

Warner Joint Venture (JV), a joint venture they had created in the mid-1980s.  Horner  



testified that she and Warner reached the $105,000 figure on the belief that it would  



satisfy all the corporation's liabilities, and they submitted a financial pre-qualification  



letter after the March 20 deadline but before the bid opening.  



                    Horner called a meeting on April 2 at Burns's office for the bid opening.  



                                           

All three directors attended.  Warner briefly described the efforts to market Bittner Lode;  



                                                                                

Horner then turned the meeting over to Burns, who opened the box where sealed bids  



                                                                                             

were kept and revealed that there was only one bid, the JV's.  Brooks moved that the bid  



                                                                       

be accepted.  He raised no objection to the sale, despite Burns's caveat that it represented  



                                                                                         

an  apparent  conflict  of  interest,  and  the  directors  voted  unanimously  to  approve  it.  



                                                                                                         

Horner and Warner presented a cashier's check for the full bid price immediately after  



the meeting, and within three days Warner prepared and signed draft minutes of the  



meeting.  



                                                                                

                    Two months later, Brooks sent a letter to Horner and Warner in which he  



                                                                                                     

formally objected to the sale of Bittner Lode and demanded that they call a corporate  



                                                                                               

meeting to reopen bidding; they did not do so.  He brought suit individually and on  



                                                                                                     

behalf of W.B.H. to void the sale and re-convey Bittner Lode to the corporation.  Brooks  



alleged that Horner and Warner breached their fiduciary duty to W.B.H. in the marketing  



                                                              - 4 -                                                        6988
  


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

and sale of the mining claims, concealed and misrepresented facts material to the sale,  



and usurped a corporate opportunity.  



                   Following a six-day bench trial, the superior court made extensive factual  



findings.  It concluded that the sale of Bittner Lode was a conflict of interest but that  



Horner  and  Warner  overcame  it.    It  also  found  that  Horner  and  Warner  neither  



                                                                       

misrepresented the sale process nor breached their fiduciary duty to the corporation:  the  



                                                             

evidence failed to support Brooks's claims that they undervalued Bittner Lode, withheld  



information  from  him,  or  marketed  the  claims  in  a  manner  that  would  discourage  



bidding.   



                                                                    

                   Brooks appeals.  He argues that the sale is void under both AS 10.06.450(b)  



and  AS  10.06.478(a)  because  (1)  Horner  and  Warner  did  not  disclose  all  the  facts  



                                                                     

material to the sale; (2) Brooks lacked authority and adequate notice when he voted to  



approve it; and (3) the transaction, overall, was not just and reasonable.  



III.      STANDARDS OF REVIEW  



                                                                                                         

                   "We apply our independent judgment to any questions of law, adopting the  

                                                                                                         3  Questions  

rule of law that is most persuasive in light of precedent, reason, and policy." 



of interpretation of the meaning of written documents are questions of law unless there  

                                                                                                    

                                                                    4  "We employ the clearly erroneous  

is conflicting evidence as to the parties' intent.    

standard to review a lower court's factual findings."5   We reverse factual findings "only  

                                                                                            



         3         Holmes v. Wolf , 243 P.3d 584, 588 (Alaska 2010) (quoting                         McCormick v.  



Reliance Ins. Co. , 46 P.3d 1009, 1011-12 (Alaska 2002)).  



         4         Sprucewood Inv. Corp. v. Alaska Hous. Fin. Corp., 33 P.3d 1156, 1161  



(Alaska 2001).  



         5         Harris v. AHTNA, Inc. , 193 P.3d 300, 305 (Alaska 2008).  



                                                          - 5 -                                                   6988
  


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

                                                             

if we are left with a definite and firm conviction that a mistake has been made after  



                                                              6  

considering the record as a whole."   



IV.         DISCUSSION  



                                                           

                        Horner and Warner were shareholders and directors when they bid on the  



corporation's  single  asset,  Bittner  Lode,  and  because  of  their  fiduciary  duty  to  the  



                                                                                                                             

corporation and the other shareholder-director, they had the burden of proving that the  



                                    7  

transaction was fair.   For ordinary transactions, directors have the protection of the  



                 

business   judgment  rule  as  long  as  they  meet  the  standard  of  care  set  out  in  



AS 10.06.450(b) - "the care . . . that an ordinarily prudent person in a like position  



                                                                        8  

                                                                           But as Brooks correctly points out, the law  

would use under similar circumstances." 



                                                                                                                                 9  

                                                                                                                                    This higher  

requires a higher standard when a transaction involves director self-interest. 



            6          Id .  



            7          See Alaska Plastics, Inc. v. Coppock, 621 P.2d 270, 276 (Alaska 1980)                           



("The existence of a fiduciary duty between shareholders would justify careful scrutiny   

and shifting the burden onto the defendants to show that the transaction was fair." (citing           

 13 W. J 

              AEGER ,  WILLISTON ON  CONTRACTS   1626A at 806-08 (3d ed. 1970))).  



            8          AS 10.06.450(b) requires a director to "perform the duties of a director . . .     



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."  See also  

Henrichs v. Chugach Alaska Corp. , 250 P.3d 531, 537 (Alaska 2011) ("The essence of  

                                                                                                                           

 [the business judgment] doctrine is that courts are reluctant to substitute their judgment  

                                                                                                         

for that of the board of directors unless the board's decisions are unreasonable." (quoting  

                                                                                                               

Alaska Plastics , 621 P.2d at 278)).  



            9          See, e.g., Norlin Corp. v. Rooney, Pace Inc. , 744 F.2d 255, 265 (2d Cir.  

                                                      

 1984) (holding that "the business judgment rule governs only where the directors are not  

                                            

shown to have a self-interest in the transaction at issue," and that "[o]nce self-dealing . . .  

                                                              

is demonstrated, the duty of loyalty supersedes the duty of care, and the burden shifts to  

                                                                                   

the directors to prove that the transaction was fair and reasonable to the corporation"  

                                                                           

                                                                                                                                (continued...)  

                                                                        - 6 -                                                                       6988  


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

                                                                                      

standard is codified in AS 10.06.478(a), which requires a court to find that (1) "the  



                                                                                    

material facts as to the transaction and as to the director's interest are fully disclosed or  



                        

known to" the other directors; (2) the board nonetheless approves the transaction "in  



                                                                                                                                     

good  faith,"  not  counting  the  votes  of  the  interested  directors;  and  (3)  "the  person  



                                                                                                                     

asserting the validity of the contract or transaction sustains the burden of proving that the  



                                                

contract or transaction was just and reasonable as to the corporation at the time it was  



                                                                     10  

                                                                                               

authorized, approved, or ratified."                                      We agree with the superior court's conclusion that  

this standard was met in this case.11  



                                                                       

             A.	           The Superior Court Did Not Clearly Err In Finding That Brooks Had  

                           Knowledge Of All Facts Material To The Sale.  



                                                                                                                                        

                           The superior court found that Brooks "had knowledge of the material facts  



                                                                                                

of the transaction before he moved to approve it and voted yes on his motion."  The court  



found specifically that Brooks "was made aware of the bidding requirements" and the  



                                                                           

minimum bid price, which he in fact had voted to approve in December 2009; knew of  



                                                                                                                                            

the corporation's marketing efforts; "was aware of the general market climate"; and was  



             9(...continued)  



(internal quotation marks and citation omitted)).  



              10	          AS 10.06.478(a)(2).   



              11           As a preliminary matter, we reject Brooks's apparent contention that the                                                             



superior court clearly erred in deciding that the April meeting was a directors' meeting       

rather than a shareholders' meeting (though Brooks contends that the meeting was not                                                   

valid however characterized).  AS 10.06.478(a)(1) and (2) apply somewhat different  

standards  for  determining  the  propriety  of  self-interested  transactions  depending  on  

whether it is shareholders or directors who approve them.  Though there was evidence  

                                                                                                                      

to the contrary, the superior court's decision that the April meeting was a directors'  

                                                                                                                                                       

meeting was supported by Warner's contemporaneous characterization of it as such in  

                                                                                                                                                  

the draft minutes and by the nature of the business conducted, which fell within the scope  

                                                                                  

of the directors' dissolution activities.  We see no clear error in this finding.       



                                                                                   - 7 -	                                                                                  6988  


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

                                                                

"charged with knowledge that as the only disinterested director, the law vested him with  



sole authority to approve or disapprove the sale of the lode by casting his vote."  



                                                                                                             

                    Brooks argues on appeal that one other material fact was concealed from  



him:  that the JV had not met the deadline for proving its financial pre-qualification.  The  



bid submission criteria required that "[a]ll bidders must be prequalified by submitting  



                                                                                                 

verification of financial ability not later than March 20, 2010," but the JV submitted its  



pre-qualification letter on March 25, five days late.   



                    Although Brooks addressed this issue in the superior court through his  



cross-examination  of  Burns,  the  corporation's  attorney,  he  does  not  appear  to  have  



argued   that   it   represented   an   omission   of   material   fact.      The   superior   court  



understandably did not include the JV's failure to meet the financial pre-qualification  



                                                                                                                  12  

                                                                                                                     we see no  

deadline among the allegations it analyzed.  But even considering the issue, 



                                                                                            

error in the superior court's conclusion that Brooks "had  knowledge of the material  



facts" before voting to approve the transaction.   



                                                                                    

                    Burns testified that he selected March 20 as the deadline for financial pre- 



                                                    

qualification arbitrarily, counting back from the bid deadline of March 31; that on March  



          

25 he received the JV's financial pre-qualification letter from a bank confirming that it  



                 

had funds available in the amount of its potential bid; and that as corporate counsel he  



                                                                                

independently confirmed that the letter satisfied the bid criteria and should be accepted.  



                                     

It is undisputed that the corporation had the letter in hand at the time the JV filed its bid  



                                                                                      

(on the March 31 deadline) and before the bid opening, in time to satisfy the deadline's  



apparent  purpose  of  assuring  the  directors  that  any  bid  under  consideration  was  



          12  

                                                                                                                   

                    Horner and Warner do not argue on appeal that Brooks has waived this  

                            

point. Because it is fully briefed without objection, we exercise our discretion to address  

                                                                                                                   

it.  See In re B.L.J., 717 P.2d 376, 381 n.5 (Alaska 1986) (considering issue not listed in  

                                                                                                                      

points  on  appeal  where  "the  issue  has  been  briefed  and  the  appellee  and  court  are  

sufficiently informed of the matters in issue").  

                                                               - 8 -                                                            6988  


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

financially supported. The JV in fact was financially qualified to make the bid, as was  



                                                                                     

conclusively demonstrated by its immediate payment by cashier's check following the  



                                                                                        

bid opening.  And Brooks was plainly not relying on the pre-qualification deadline; it is  



                         

his position on appeal, in fact, that he did not know the deadline existed until after the  



sale process was over, and that in his view it was unrealistically early.   



                                                                                                                

                     Brooks does not explicitly argue that he would have voted against the sale  



of  Bittner  Lode  had  he  only  known  that  the  JV  was  late  in  filing  its  financial  pre- 



                                                                                                             

qualification letter.  He argues, however, that Burns's assurance to the directors that the  



                         

JV met the bid criteria was nonetheless a material misrepresentation; that because of it  



                                                                                                                           

Brooks was unaware of all the "material facts as to the transaction"; that his vote in favor  



                                                                                         

of the transaction was not a fully informed one; and that Horner and Warner therefore  



                                                                            

failed to carry their burden of satisfying the first element of the test of AS 10.06.478(a).  



                     But the missed deadline was material only if a reasonable director would  



                                                                                  13  

                                                                                          

have considered it important in deciding how to vote.                                It is undisputed that the JV filed  



its financial pre-qualification letter before its bid, before the bid deadline, in time for  



                                                                                        

Burns  to  verify  it,  and  in  time  for  the  information  to  be  useful  to  the  board.    It  is  



                                                                                                         

undisputed that the JV was, in fact, financially qualified.  And it is undisputed that the  



JV's bid exceeded the minimum bid and was, ultimately, the only bid the board could  



                 

consider.  Brooks has no convincing explanation as to why, under these circumstances,  



a reasonable director would have found it important that the JV had filed its financial  



                                                                                                                 

pre-qualification letter five days after the deadline.  We therefore reject his contention  



           13  

                                                                                          

                     See Brown v. Ward, 593 P.2d 247, 250 &  n.6 (Alaska 1979) ("Federal  

                                                                                   

authorities have established that a misrepresentation is material if there is a substantial  

                           

likelihood that a reasonable shareholder would consider it important in deciding how to  

                                                   

vote. . . . Common law concepts of materiality are not in essence different." (citing TSC  

Indus., Inc. v. Northway, Inc. , 426 U.S. 438, 449 (1976); RESTATEMENT  (SECOND) OF  

TORTS   538(2) (1977))).  

                                                                - 9 -                                                             6988  


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

that, as of the time he voted, he did not know "the material facts as to the transaction and  

as to the [other directors'] interest," as required by AS 10.06.478(a).14  



                                                                                    

          B.	       The Superior Court Did Not Clearly Err In Finding That The Board  

                   Approved The Sale In Good Faith By A Sufficient Vote.  



                                                               

                   Brooks does not dispute that he made the motion to accept the JV's bid at  



                                                                                                           

the April 2010 meeting and that he then, along with Horner and Warner, voted in favor  



                     15  

of his motion.           For purposes of determining the transaction's validity, his is the only  



                          16  

vote that counted.            He argues, however, that his vote was void because notice of the  



                                                     

meeting was defective and because he lacked the authority to take actions in pursuance  



of the corporation's dissolution.  We reject both these arguments.  



                    1.	      Brooks waived notice by attending the directors' meeting.  



                   Alaska Statute 10.06.470(b) provides that a "special meeting of the board  



              

. . . shall be held as provided in the bylaws or, in the absence of a bylaw provision, after  



           

either notice in writing sent 10 days before the meeting or notice by electronic means,  



personal  messenger,  or  comparable  person-to-person  communication  given  at  least  



72  hours  before  the  meeting."    The  W.B.H.  bylaws  provide  that  "[a]ttendance  of  a  



                                                                  

director at a meeting shall constitute waiver of notice of that meeting unless he attends  



                                                                                                              

for the express purpose of objecting to the transaction of business because the meeting  



          14	       Emphasis added.  



          15       Brooks does not argue that Horner and Warner should have abstained from  



voting.    We  have  held  that  "it  is  unworkable  to  require  participants  in  closely-held  

businesses to disqualify their votes on matters involving self-interest." Stevens ex rel.  

Park View Corp. v. Richardson , 755 P.2d 389, 394 (Alaska 1986).  "Decisions made in  

                                                              

a small corporation often have a direct and immediate financial impact on many or all of  

            

the participants.  Yet, it seems to us that that is not a sufficient ground for disqualifying  

                                                                                           

their votes."  Id. (footnote omitted).  



          16       AS  10.06.478(a)(2)  requires  approval  of  the  transaction  at  issue  "by  a  



sufficient vote without counting the vote of the interested director or directors."  

                                                           -  10 -	                                                       6988  


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

                                  

has not been lawfully called or convened."  Brooks contends that this provision is void  



because  it  conflicts  with  the  notice  requirement  of  AS  10.06.470(b).    The  statute,  



however, expressly allows corporations to adopt different procedures in their bylaws;  



besides,  the  bylaws'  waiver  provision  closely  follows  a  waiver  provision  in  a  later  



section of the statute.  Alaska Statute 10.06.470(c) provides that "[n]otice of a meeting  



                                                

need not be given to a director . . . who attends the meeting without protesting before the  



meeting or at its commencement the lack of notice."  



                    Brooks  argues  in  the  alternative  that  because  the  first  sentence  of  the  



                                                                                                               

relevant W.B.H. bylaw allows directors to waive notice of special board meetings in  



                                                                            

writing, the second sentence - addressing waiver by attendance - must apply only to  



                                                                                                                    

the regular annual meeting, not to a special meeting like the one called in April to review  



       17  

                                                                                                        

bids.      But under the bylaws, regular annual meetings do not require notice at all.  The  



                                                                                                                

waiver provision can logically apply only to other meetings for which notice is ordinarily  



required.  And allowing a director to waive notice of special meetings by attendance  



                                                                                                  

reflects the reality that such meetings - unlike the regular annual meeting - may need  



to be called on shortened time to address corporate issues as they arise.   



                    In  short,  the  W.B.H.  bylaws  allow  waiver  by  attendance,  the  relevant  



                                                                

statutes do not require something else, and the superior court did not clearly err when it  



found that Brooks waived notice of the April meeting by attending it without protest.   



          17        The provision provides, in full:  



                              Section 5.  Waiver of Notice.  A director may waive in  

                                                                          

                    writing notice of a special meeting of the board either before  

                    or  after  the  meeting;  and  his  waiver  shall  be  deemed  the  

                                                                                           

                    equivalent of giving  notice.  Attendance of a director at a  

                                                    

                    meeting  shall  constitute  waiver  of  notice  of  that  meeting  

                    unless he attends for the express purpose of objecting to the  

                                               

                    transaction  of  business  because  the  meeting  has  not  been  

                    lawfully called or convened.  

                                                            -  11 -                                                         6988  


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

                     2.        Brooks had authority to vote to approve the sale.  



                                                                                                         

                     Brooks also argues that he lacked authority to approve the sale at the April  



                                                                                                              

2010  meeting  because  it  was  a  directors'  meeting,  and  the  board  of  directors  lacks  



                                                                                                  18  

authority  to  "dissolve  [the  corporation]  on  its  own  initiative."                                 The  superior  court  



                                                                              

agreed that the April 2010 meeting was a directors' meeting, noting that Warner prepared  



and  signed  draft  minutes  of  the  meeting  and  labeled  them  as  minutes  of  a  special  



directors' meeting, and that opening and accepting bids -- the stated purpose of the  



meeting --  was part of the directors' oversight of the dissolution process.  



                            

                     But  it  was  at  the  December  2009  shareholders'  meeting  that  Brooks,  



                                                                                                                  

Horner, and Warner had voted unanimously to dissolve the corporation and liquidate  



                     19  

                                                                                                     

Bittner Lode.            Alaska Statute 10.06.615(b) provides that "[i]f a voluntary proceeding  



                                                                                                            

for  winding  up  has  commenced,  the  board  shall  continue  to  act  as  a  board  and  has  



powers . . . to wind up and settle its affairs."  Consistent with these facts in this legal  



                                                                                                              

framework, the superior court concluded that the board of directors was acting within its  



                               

power "to wind up and settle its affairs" when Brooks, as a disinterested director, voted  



          18        AS 10.06.605(b)  lists only three exceptions in which the board of directors,                   



rather than the shareholders,                has authority to wind up and dissolve a corporation: "if the  

corporation has (1) been adjudicated bankrupt; (2) disposed of all of its assets and has  

not conducted any business for a period of five years immediately preceding the adoption  

                                                                                

of the resolution to dissolve the corporation; or (3) issued no shares."   This case falls  

                                                                                                               

under none of these exceptions.  



          19        AS 10.06.605(a) ("A corporation may elect voluntarily to wind up and  

                                                                                                             

dissolve by . . . the vote of shareholders taken at a special or annual meeting.").  

                                                              -  12 -                                                            6988  


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

                                                                            20  

                                         

to approve the JV's bid at the April 2010 meeting.                              We see no error in the superior  



court's decision of this issue.  



          C.	       The Superior Court Did Not Clearly Err In Deciding That The Sale  

                    Was Just And Reasonable.  



                                                                              

                    Finally, Brooks challenges the superior court's conclusion that Horner and  



                                                                                                             

Warner        met     their     burden       of    proving        the    final     element       of    the    test    under  



                                 

AS 10.06.478(a)(2):  that "the transaction was just and reasonable as to the corporation  



at  the  time  it  was  authorized."    Brooks  contends  that  Horner  and  Warner  made  



unreasonable or bad faith decisions in their marketing campaign and that the superior  



court erred when it reviewed the reasonableness of the minimum bid price under the  



                                                                                                      

common law business judgment rule rather than the "entire fairness test" applicable to  



                                                                             21  

situations  where  a  director's  loyalty  is  in  question.                       We  are  unpersuaded  by  these  



arguments.   



                    We  have  never  had  occasion  to  explain  what  makes  a  self-interested  



                                                                                            

transaction "just and reasonable" in a context like this one.   Most courts model their  



               

standard in such cases after Delaware's, which requires "the [self-interested] directors  



                                                                                   

to prove that the bargain [was] at least as favorable to the corporation as they would have  

                                                                           22  This exacting standard has come  

required if the deal had been made with strangers."                                     



          20        See   AS   10.06.615(a)    ("Voluntary   proceedings   for   winding   up   the  



corporation commence upon the resolution of shareholders or directors of the corporation  

electing to wind up and dissolve, or upon the filing with the corporation of a written  

consent of the shareholders.").  



          21        See,  e.g.,  Nixon  v.  Blackwell ,  626  A.2d  1366,  1375-76  (Del.  1993)  

                                              

(distinguishing the "entire fairness test" when a director's loyalty is in question from the  

                                                                                                   

business judgment rule, which protects decisions made under a director's duty of care).  

                                                                                                             



          22        Gottlieb v. Heyden Chem. Corp., 90 A.2d 660, 663 (Del. 1952); see, e.g.,  



           

Kim v. Grover C. Coors Trust , 179 P.3d 86, 91 (Colo. App. 2007); Feldheim v. Sims, 800  

                                                                                                           (continued...)  

                                                            -  13 -	                                                       6988  


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

                                                      

to be known as the "entire fairness" test, and it "requires judicial scrutiny regarding both  



                                        23  

fair dealing and fair price."               Assuming without deciding that "just and reasonable" for  



                         

purposes of AS 10.06.478(a)(2) requires the same level of proof as the "entire fairness"  



                                               24  

                                                                                                           

test, as Brooks contends it does,                 we see no error in the superior court's conclusion that  



the transaction at issue here satisfied the statutory standard.  



                    First, with regard to the JV's bid price of $105,000, the superior court  



pointed  out  that  it  is  in  excess  of  the  minimum  bid  unanimously  approved  by  the  



shareholders, including Brooks, in their December 2009 meeting, and that if the same bid  



                              

had come from an otherwise-qualified third party instead of interested directors, the  



                                                                                            

corporation "would have been legally obligated to sell for that price."  Since the bid price  



          22(...continued)  



N.E.2d  410,  421-22  (Ill.  App.  2003);  Cookies  Food  Prods.,  Inc.  v.  Rowedder,  430  

N.W.2d  447,  454  (Iowa  1988);  Becker  v.  Knoll ,  239  P.3d  830,  835  (Kan.  2010);  

Demoulas v. Demoulas Super Markets, Inc. , 677 N.E.2d 159, 180-81 (Mass. 1997);  

Alpert v. 28 Williams St. Corp. , 473 N.E.2d 19, 26-27 (N.Y. 1984); Rock v. Rangos , 61  

                                                                                                              

A.3d 239, 255 (Pa. 2013);  Willard ex rel. Moneta Bldg. Supply, Inc. v. Moneta Bldg.  

                                                                                                         

Supply, Inc., 515 S.E.2d 277, 287 (Va. 1999).  

                                                                      



          23  

                                                   

                    See,  e.g.,  Kahn  v.  Tremont  Corp. ,  694  A.2d  422,  428  (Del.  1997)  

("Regardless of where the burden lies, when a controlling shareholder stands on both  

                                                                                                        

sides of the transaction the conduct of the parties will be viewed under the more exacting  

               

standard of entire fairness. . . ."); Burcham v. Unison Bancorp, Inc. , 77 P.3d 130, 149  

           

(Kan. 2003) ("The entire fairness standard is exacting and requires judicial scrutiny  

regarding  both  fair  dealing  and  fair  price."  (internal  quotation  marks  and  citation  

omitted)).  



          24        Brooks mistakenly contends that the superior court applied the business  



judgment rule to "the overall transaction" rather than a heightened standard implicated  

                                             

by Horner's and Warner's conflict of interest.  The superior court applied the business  

                                                                       

judgment rule only to the shareholders' decision of the minimum bid price, addressed  

below.  It properly analyzed the "overall transaction" in the context of the applicable  

conflict-of-interest statute, AS 10.06.478(a).  

                                                             -  14 -                                                         6988  


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

                                         

is no less favorable to the corporation than would have been required "if the deal had  

been made with strangers,"25 the price was necessarily fair.    



                        Nor do we fault the superior court for reviewing the shareholders' approval  



                                                                                             

of a minimum bid price under the business judgment rule, by which "courts are reluctant  



to substitute their judgment for that of the board of directors unless the board's decisions  



                                  26  

                                                                                                                     

are  unreasonable."                     Although  the  law  does  apply  a  different  standard  to  director  



                                                                                 

decisions involving a conflict of interest, the parties here decided on the minimum bid  



price at their December shareholders' meeting, well before Horner and Warner created  



                                                                                                 27  

                                                                                                     To support his argument that  

the conflict by deciding to submit a self-interested bid. 



the  minimum  bid  price  was  unreasonable,  Brooks  points  to  trial  testimony  by  the  



defendants'  expert  in  evaluating  mining  claims,  who  concluded  that  "[t]he  price  of  



                                                                                            28  

$100,000 would be considered a really good buy."                                                 But it was undisputed that the  



corporation lacked the resources in 2010 for a reliable valuation of the claim and needed  



                                                           

to sell the asset soon in order to wind up the corporation and pay off its debts.  Under  



                                                                                                                         

these circumstances, and in the absence of any evidence of an earlier conflict of interest,  



the superior court properly deferred to the judgment of the parties when together they  



            25          Gottlieb, 90 A.2d at 663.  



            26         Henrichs  v.  Chugach  Alaska  Corp. ,  250   P.3d  531,  537  (Alaska  2011)  



(quoting Alaska Plastics, Inc. v. Coppock , 621 P.2d 270, 278 (Alaska 1980));                                                             see also  

Betz v. Chena Hot Springs Grp.                         , 657 P.2d 831, 835 (Alaska 1982) (noting that "[a]bsent   

bad   faith,  breach  of  a  fiduciary  duty,  or  acts  contrary  to  public  policy,  we  will  not  

interfere with . . . management decisions").  



            27  

                                                                                                                               

                        The superior court found credible Warner's testimony that she and Horner  

decided on March 30 that they would submit their bid.  



            28          Brooks's own expert, on the other hand, testified that no reasonable bidder  



would offer $100,000 for Bittner Lode without significantly more time for due diligence  

than the corporation was willing to provide.  

                                                                        -  15 -                                                                      6988  


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

                     

decided,  "as  shareholders  and  directors,"  that  $100,000  was  the  minimum  bid  their  



corporation would accept.   



                                                                                                     

                    Brooks also challenges as unfair and unreasonable a number of steps in the  



marketing and bid process.  He argues that Horner and Warner failed to market the  



                                                 

property as agreed, preparing a "flawed sales brochure" instead of advertising in mining  



                                                 

magazines.  But as the superior court found, Brooks had agreed to delegate winding-up  



                                                                      

activities to Horner, informing Warner that he was too busy to be involved in them  



                                                                                                                    

himself.  It was undisputed that the corporation lacked the resources to do much more  



                                                                            

than it did.  And more importantly, Brooks was fully aware of the marketing strategy  



                                                                  

pursued - and the limits of the market - when he voted to approve the sale of Bittner  



Lode to the JV.  



                                                                                  

                    Brooks also contends that the financial pre-qualification requirement, the  



corporation's  disclaimer  of  liability  for  inaccuracies  in  the  geological  data,  and  the  



March 31, 2010 bid deadline were unreasonable because they discouraged potential  



bidders.  Burns testified that the pre-qualification requirement and the disclaimer were  



                                                               

intended to avert "phantom numbers that never would materialize" and  the expenses that  



                                                     

accompany buyer's remorse, thus limiting the field to serious bidders.  While it is true  



                                                                                                           

that potential bidders might have wanted more time to inspect Bittner Lode, a later sale  



                                                                           

could have meant another year of upkeep costs which W.B.H. was in no condition to  



bear.    And  nothing  in  the  testimony  of  Halbertsma,  the  single  prospective  bidder,  



                                        

suggested that any of the disputed bid conditions dissuaded him from submitting a bid,  



        

and  there  was  no  other  evidence  that  the  disputed  conditions  discouraged  potential  



                                                             

bidders.  Having carefully weighed the marketing efforts and bid conditions against the  



                      

corporation's need to liquidate its sole asset at minimal cost, the superior court did not  



clearly err in finding that the transaction was just and reasonable.  



                                                              -  16 -                                                       6988
  


----------------------- Page 17-----------------------

V.     CONCLUSION  



       We AFFIRM the judgment of the superior court.  



                                   -  17 -                                     6988
  

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