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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Alaska Building, Inc. v. Legislative Affairs Agency (8/25/2017) sp-7193

Alaska Building, Inc. v. Legislative Affairs Agency (8/25/2017) sp-7193

          Notice:   This opinion is subject to correction before publication in the P                    ACIFIC  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  



ALASKA  BUILDING,  INC.,                                     )  

                                                             )         Supreme  Court  No.  S-16371  

                              Appellant,                     )  

                                                                                                                              

                                                             )         Superior Court No. 3AN-15-05969 CI  

                    v.                                       )  

                                                             )                            

                                                                       O P I N I O N  

                                           

LEGISLATIVE AFFAIRS AGENCY   )  

                                          

and 716 WEST FOURTH AVENUE                                   )                                              

                                                                      No. 7193 -  August 25, 2017  

LLC,                                                         )  

                                                             )
  

                              Appellees.                     )
  

                                                             )
  



                                                                                                        

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

                                                                                              

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



                                                                                                            

                    Appearances:  James B. Gottstein, Law Offices of James B.  

                                                                                                           

                    Gottstein,  Anchorage,  for  Appellant.                       No  appearance  by  

                                                                                                     

                    Appellees  Legislative Affairs Agency  or 716 West Fourth  

                                  

                    Avenue LLC.  



                                                                                                 

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

                                                                   

                    Bolger, and Carney, Justices.  



                                         

                    MAASSEN, Justice.
  

                                                  

                    BOLGER, Justice, dissenting.
  



I.        INTRODUCTION  



                                                                                                                          

                    A building owner sued an agency of the Alaska Legislature and a private  



                                                                                                                                

developer, alleging that the agency and developer had entered into an illegal lease for the  



                                                                                                                            

building next door.  The complaint sought both declaratory relief invalidating the lease  


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

 and monetary compensation calculated as a percentage of the savings once the lease was                                                                                                                                                                                                                                                                                                                                                        



invalidated.     The   building   owner   succeeded   in   invalidating   the   lease   but   lost   the  



 compensation claim; the superior court concluded that the claim had no basis in Alaska                                                                                                                                                                                                                                                                                                                                        



law.   The court later found that the compensation claim was frivolous and justified a                                                                                                                                                                                                                                                                                                                                                                      



 sanction under Alaska Civil Rule 11.                                                                                                                                                              The building owner appeals that decision.                                                                                                                                                                                         



                                                                      We conclude that the compensation claim was based on a nonfrivolous                                                                                                                                                                                                                                              



 argument for establishing new law and thus did not violate Rule 11.                                                                                                                                                                                                                                                                                                                   We therefore   



reverse.  



II.                                FACTS AND PROCEEDINGS                                                        



                                   A.                                 Facts  



                                                                      In September 2013 the Alaska Legislative Affairs Agency executed a lease                                                                                                                                                                                                                                                                                      



 agreement with 716 West Fourth Avenue LLC (716 West Fourth) for the Legislative                                                                                                                                                                                                                                                                                                                        



Information Office building (LIO building) in downtown Anchorage.                                                                                                                                                                                                                                                                                                               The agreement   



 called for significant renovation and expansion. 716 West Fourth agreed to demolish an                                                                                                                                                                                                                                                                                                                                                                



 adjoining building and increase the square footage of the LIO building from 23,645 to                                                                                                                                                                                                                                                                                                                                                                  



 64,048 - a 170% increase in space.                                                                                                                                                              The Agency agreed to pay up to $7.5 million for                                                                                                                                                                                                   



 certain "tenant improvements," which the superior court later characterized as a "virtual                                                                                                                                                                                                                                                                                                                           



 'gutting' and reconstruction of the existing rental space."                                                                                                                                                                                                                                             The agreement also extended                                                                                



the term of the lease and increased the Agency's monthly rent from $56,863.05 to                                                                                                                                                                                                                                                                                                                                                                       



 $281,638.00  



                                   B.                                 Proceedings  



                                                                      Alaska Building, Inc., the owner of property next door to the LIO building,                                                                                                                                                                                                                                                                    



 filed a lawsuit in superior court challenging the lease agreement and renovation.                                                                                                                                                                                                                                                                                                                                              Count  



 one    of    the    complaint    sought    a    declaration   that   the    lease    agreement    violated  



AS   36.30.083(a),  which   permits   the   Alaska   Legislature   to   extend   an   existing   real  



property lease - rather than soliciting competitive bids for a new lease pursuant to                                                                                                                                                                                                                                                                                                                 



                                                                                                                                                                                                                           -2-                                                                                                                                                                                                             7193
  


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certain statutory procedures - only if the extension would achieve "a minimum cost  



                                                                                                                               

savings of at least 10 percent below the market rental value."  A second count of the  



                                                                                                                     

complaint alleged that the expansion and renovation project "was negligently designed,  



                                                                                                                             

managed,  or  constructed,  .  .  .  resulting  in  damage  to  the  Alaska  Building."                                      The  



                                                                                                                         

complaint's prayer for relief included the claim central to this appeal:  that if Alaska  



                                                                                                                         

Building succeeded in invalidating or reforming the lease agreement, it should receive  



                                                                                                                              

judgment in an amount equal to 10 percent of the resulting savings to the Agency.  



                                                                                                                                 

                     On the Agency's motion, the superior court ordered Alaska Building to  



                                                                                                                                  

sever count two - the property damage claim - from the complaint and file it as a  



                                                                                                                        

separate action.  Alaska Building accordingly filed an amended complaint that omitted  



                                                                                                                                     

count two, while retaining the claim for 10 percent of the Agency's potential savings.  



                                                                                                                            

The defendants then moved for a ruling on that claim, contending that it had no legal  



                                                                                                                              

basis.  The superior court granted the motion, concluding that Alaska Building had "no  



                                                                                

legal grounds on which to request 10% of any lease savings."  



                                                                                                                     

                     The parties then litigated the remaining claims. Alaska Building continued  



                                                                                                                              

to argue that the lease agreement was illegal, while the Agency argued that the lease was  



                                                                                                                            

a valid "extension" under AS 36.30.083 and that some portions of the dispute were  



                                                                                                                                 

nonjusticiable political questions.  716 West Fourth argued for "summary dismissal" of  



                                                                                                                    

all remaining claims on justiciability grounds.  The court ruled in Alaska Building's  



                                                                                                                        

favor, deciding that the issue was justiciable and that the lease violated the law because  



                                                                                                                   

it was "not an agreement to extend a lease but rather a wholly new lease instrument  



                                                                                 

altogether and should have been competitively bid."  



                                                                                                                   

                     This ruling ended the parties' substantive dispute.  The court determined  



                                                                                                                                  

that Alaska Building was the prevailing party on the lease validity issue and awarded it  



                                                                                                             

attorney's  fees  of  over  $26,000  against  716  West  Fourth,  of  which  approximately  



                                                                                                                                

 $17,000 was jointly owed by the Agency.  The Agency moved for attorney's fees as  



                                                                -3-                                                        7193
  


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

well, arguing that it had prevailed against Alaska Building on count two - the property                                                                                                                                     



damage claim that had been                                                            severed  - and the percentage-of-savings claim.                                                                                                  The  



Agency also requested sanctions under Alaska Civil Rule 11 because of the percentage-                                                                                                                              



of-savings claim, arguing that Alaska Building "had no good faith basis or legal support                                                                                                                                       



for bringing" it.                                  The court granted the Agency's fees motion, concluding that the                                                                                                                        



percentage-of-savings   claim   was   frivolous   and  awarding   the   Agency   $2,217.80   in  



attorney's fees under Alaska Civil Rules 82 and 11.                                                                                      



                                      Alaska   Building   appeals  only   the   Rule   11   decision,   arguing   that   the  



percentage-of-savings   claim,   though   novel   and   ultimately   unsuccessful,   was   not  



frivolous.   The Agency and 716 West Fourth did not participate in the appeal.                                                                                                                          



III.               STANDARD OF REVIEW                                   



                                      We review for abuse of discretion a trial court's decision to impose Rule 11                                                                                                                           



                            1  

 sanctions,                                                                                                                                                                                                                 

                                and we will find an abuse of discretion only when the trial court's decision  

                                                                                     2     We have held that the deferential abuse of discretion  

                                                                                                                                                                                                                        

is "manifestly unreasonable." 



 standard is appropriate in the Rule 11 context because the trial court, unlike an appellate  

                                                                                                                                                                                                                           

court, is "intimate[ly] familiar[] with the proceedings below"3   and generally "better  

                                                                                                                                                                                                                                



                   1                  Enders v. Parker                                  , 125 P.3d 1027, 1031 (Alaska 2005)                                                                              (citing   Keen v.   



Ruddy, 784 P.2d 653, 658 (Alaska 1989)).                                                           



                   2                   Weidner v. State, Dep't of Transp. & Pub. Facilities, 860 P.2d 1205, 1212  

                                                                                                                                                                                                                                      

n.8 (Alaska 1993) (quoting Gates v. City of Tenakee Springs, 822 P.2d 455, 464 (Alaska  

                                                                                                                                                                                                                              

 1991)).  



                   3                 Keen, 784 P.2d at 658 (citing R.K. Harp Inv. Corp. v. McQuade, 825 F.2d  

                                                                                                                                                                                                                                        

 1101, 1103 (7th Cir. 1987)).  

                                                            



                                                                                                                      -4-                                                                                                             7193
  


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

situated" than an appellate court "to marshal the pertinent facts and apply the fact-                                                         

dependent legal standard mandated by Rule 11."                                      4  



                       But sanctions under Rule 11(b)(2) - which requires a court to determine  

                                                                                                                                     



whether  a  party's  "claims,  defenses,  and  other  legal  contentions  are  warranted  by  

                                                                                                                                                 



existing law or by a nonfrivolous argument for . . . establishing new law" - are unlikely  

                                                                                                                                        



to depend solely on questions of fact.  Although a Rule 11 motion may require the court  

                                                                                                                                              



to "consider factual questions regarding the nature of the attorney's prefiling inquiry and  

                                                                                                                                                

the factual basis" of the party's position,5  "whether a pleading is 'warranted by existing  

                                                                                                                                         

law or a good faith argument' for changing the law" is likely to be a legal issue.6                                                         But a  

                                                                                                                                                    



trial court's erroneous determination of a legal issue, like its clearly erroneous finding  

                                                                                                                        

of fact, may persuade us that it was an abuse of discretion to award Rule 11 sanctions.7  

                                                                                                                                                        



                       Rule  11  "creates  an  objective  standard  of  'reasonableness  under  the  

                                                                                                                                                

circumstances.' "8                The rule may therefore require a court to consider a party's legal  

                                                                                                                                              



position within a particular factual context; for example, a court may need to consider  

                                                                                                                 



the amount of time an attorney had to inquire into the relevant facts and applicable law  

                                                                                                                                                



before meeting a filing deadline.  But in this case the superior court's decision did not  



depend on the circumstances of the case or the adequacy of the attorney's preliminary  

                                                                                                                                  



            4          Cooter  &  Gell  v.  Hartmarx  Corp.,  496  U.S.  384,  402  (1990).  



            5          Id.  at  399.  



            6          Id.  



            7          Id.   at   402   ("[The   abuse   of   discretion]   standard   would   not   preclude   the  



appellate  court's  correction  of  a  district  court's  legal  errors.").  



            8          Keen,  784  P.2d  at  658  (citing  Golden  Eagle  Distrib. Corp.  v.  Burroughs  



Corp.,  801  F.2d   1531,   1536  (9th  Cir.   1986)).  



                                                                        -5-                                                                  7193
  


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

inquiry.   The court did not hear evidence or make findings of fact but determined that                                                                                                                        



Alaska Building's percentage-of-savings claim was frivolous as a matter of law.                                                                                                                             



                                  The   issue   before   us   is   thus   not   fact-dependent   and   does   not   require  



"intimate familiarity" with the superior court proceedings.                                                                                           The primary question is a                                       



"purely legal" one, more analogous to "whether the attorney's legal argument was                                                                                                                              

                                                                                                                                                                                                          9        In  

correct"   than   to   "whether   an   attorney's   prefiling   inquiry   was   reasonable."     



determining whether the percentage-of-savings claim was a "a nonfrivolous argument  

                                                                                                                                                       

. . . for establishing new law,"10 we apply our independent judgment and "adopt the rule  

                                                                                                                                                                                                               

of law most persuasive in light of precedent, reason, and policy."11  

                                                                                                                                                                         



IV.              DISCUSSION  



                                 Alaska Building argues first that the superior court abused its discretion  

                                                                                                                                                                                                



because it "failed to make a clear record concerning the reason[]" for imposing Rule 11  

                                                                                                                                                                                                                   



sanctions.  We have held that trial courts "should, as a matter of sound practice, make a  

                                                                                                                                                                                                                      



clear record concerning the reason for imposing [a] particular sanction" and cite "the  

                                                                                                                                                                                                              

authority relied upon."12                                          We have cautioned that "[f]ailure to do so may require a  

                                                                                                                                                                                                                     



                 9               See Cooter &Gell                             , 496 U.S. at 401 ("Rather than mandating an inquiry into                                                                        



purely legal questions, such as whether the attorney's legal argument was correct, the                                                                                                                           

Rule requires a court to consider issues rooted in factual determinations.                                                                                                            For example,   

to   determine   whether   an   attorney's   prefiling   inquiry   was   reasonable,   a   court   must  

consider all the circumstances of a case.").                                                                 



                 10              Alaska R. Civ. P. 11(b)(2).  

                                                                               



                 11              Enders v. Parker, 125 P.3d 1027, 1029 (Alaska 2005) (describing our  

                                                                                                                                                                                                                

standard of review for "questions of law" (citing Catalina Yachts v. Pierce, 105 P.3d  

                                                                                                                                                                                                             

 125, 128 (Alaska 2005))).  

                                                                   



                 12              Luedtke v. Nabors Alaska Drilling, Inc., 834 P.2d 1220, 1227 (Alaska  

                                                                                                                                                                                                     

 1992) (quoting Esch v. Superior Court, 577 P.2d 1039, 1043 (Alaska 1978)).  

                                                                                                                                                                               



                                                                                                         -6-                                                                                                7193
  


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

                                                                                                                                                  13  

reversal and remand for entry of such findings."                                                                                                         The sanctions order in this case stated                                                           



"that Plaintiff's request for relief in the form of 10% of the                                                                                                                                       alleged savings to the                                       



 [Agency] for lease invalidation was frivolous" but did not explain why.                                                                                                                                                            The superior   



court did discuss the claim fully in its earlier order granting the defendants' motion for                                                                                                                                                                          



a ruling of law. The court summarized Alaska Building's asserted rationale - "to make                                                                                                                                                                        



meaningful the right of citizen-taxpayers to seek judicial redress of illegal government                                                                                                                                                



action" - but concluded that the claim had "no legal grounds":                                                                                                                                        the court reasoned that                                     



"there   [was]   no   statutory   authority   that   would   allow   th[is]   court   to   create   such   an  



incentive" to public interest litigation and that the "argument is one of public policy,                                                                                                                                                               



which is better left to [the] legislature."                                                                                  But that earlier order did not characterize the                                                                                        



claim as frivolous or imply that it had been brought in bad faith.                                                                                                                                        Given the absence of                                         



relevant findings, our usual course would be to vacate the sanctions order and remand                                                                                                                                                    

for further proceedings.                                                  14  



                                          In this case, however, a remand is not necessary because we agree with  

                                                                                                                                                                                                                                                               



Alaska Building's argument that, as a matter of law, the percentage-of-savings claimwas  

                                                                                                                                                                                                                                                                  

not frivolous.15  While the claim had little reasonable likelihood of success, we conclude  

                                                                                                                                                                                                                                                 



that it was a "nonfrivolous argument . . . for establishing new law," something Rule 11  

                                                                                                                                                                                                                                                                      

expressly permits.16  

                               



                                          Rule 11 provides:  

                                                                    



                     13                  Id.  (quoting  Esch, 577 P.2d at 1043).                                                         



                     14                  Id.   (stating  that,  in   the   absence   of   an   explanation   of   the   "reasons   for  



imposing   the   sanction,"   "our   normal   procedure   would   be   to   remand   the   award   of  

sanctions to the superior court for entry of findings").  

                                                                                                                                      



                     15                  See id. ("We decline to remand in this case . . . because we find no evidence  

                                                                                                                                                                                                                                                  

in the record which could possibly support an entry of sanctions under Rule 11.").  

                                                                                                                                                                                                                                               



                     16                  See Alaska R. Civ. P. 11(b)(2).  

                                                                                                              



                                                                                                                                   -7-                                                                                                                        7193
  


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

                              By presenting                    to   the court                a pleading, written motion,                                     or  

                              other paper . . . an attorney . . . certifies that to the best of                                                              

                              [his] knowledge,                        information,   and   belief,   formed   after   an  

                              inquiry reasonable under the circumstances . . . the claims,                                                        

                              defenses,  and  other   legal   contentions   are   warranted   by  

                              existing law or by a nonfrivolous argument for extending,                                                   

                              modifying, or reversing existing law or for establishing new                                                               

                              law.  



As discussed above, "[t]he Rule creates an objective standard of 'reasonableness under                                                                                             



the   circumstances,'   and   is   intended   to   be   more   stringent   than   a   mere   'good   faith'  

                      17   On the other hand, the rule should not be used to " 'stifle creative advocacy'  

formula."                                                                                                                                                                

or 'chill an attorney's enthusiasm in pursuing factual or legal theories.' "18   As we have  

                                                                                                                                                                                                 

acknowledged before, "a court cannot impose sanctions on a party simply for losing."19  

                                                                                                                                                                           



"[T]he imposition of a Rule 11 sanction is not a judgment on the merits of an action.  

                                                                                                                                                                                                 



Rather, it requires the determination of a collateral issue:   whether the attorney has  

                                                                                                                                                                                       

abused the judicial process, and, if so, what sanction would be appropriate."20  

                                                                                                                                                                             



               17            Keen v. Ruddy, 784 P.2d 653, 658 (Alaska 1989) (quoting                                                                            Golden Eagle  



Distrib. Corp. v. Burroughs Corp.                                           , 801 F.2d 1531, 1536 (9th Cir. 1986)).                                                 



               18            Enders v. Parker, 125 P.3d 1027, 1032 (Alaska 2005) (quoting Merriman  

                                                                                                                                                                         

v. Sec. Ins. Co. of Hartford, 100 F.3d 1187, 1194 (5th Cir. 1996)); see also Hartmarx 

                                                                                                                                                                         

 Corp. v. Abboud, 326 F.3d 862, 867 (7th Cir. 2003) ("[Rule 11] sanctions are to be  

                                                                                                                                                                                          

imposed  sparingly,  as  they  can  'have  significant  impact  beyond  the  merits  of  the  

                                                                                                                                                                                       

individual case' and can affect the reputation and creativity of counsel." (quoting Pac.  

                                                                                                                                                                                     

Dunlop Holdings, Inc. v. Barosh, 22 F.3d 113, 118 (7th Cir. 1994))).  

                                                                                                                                                          



               19            Alaska State Emps. Ass'n v. Alaska Pub. Emps. Ass'n , 813 P.2d 669, 671  

                                                                                                                                                                                       

& n.5 (Alaska 1991) ("[T]he court is expected to avoid using the wisdom of hindsight  

                                 

and should test the signer's conduct by inquiring what was reasonable to believe at the  

                                                                                                                                                                                         

time the pleading, motion, or other paper was submitted." (quoting Fed. R. Civ. P. 11  

                                                                                                                                                                                          

(1983 amendment) advisory committee's notes).  

                                                                                             



               20             Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 396 (1990).  

                                                                                                                                                     



                                                                                             -8-                                                                                    7193
  


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

                         Thesuperiorcourt concluded that                              AlaskaBuilding's                   percentage-of-savings  



                                                                                                                                                          

claim had no basis in Alaska law.  This conclusion, while unassailable, shows only that  



Alaska Building was unlikely to prevail on the merits unless it could establish new  

                                                                                                                                                         



                                                                                                        

law; it does not necessarily follow that the claim was frivolous.  



                         We have reversed sanctions awards in cases where the applicable law                                                              

                                                                                                                              21    In Alaska State  

provided no "direct[] support[]" for the sanctioned party's position.                                                                     



Employees Association v. Alaska Public Employees Association, we considered whether  

                                                                                                                                                  



the superior court abused its discretion by sanctioning a party for making two allegedly  

                                                                                                                                                

frivolous arguments that depended on distinguishable federal precedent.22   We reversed  

                                                                                                                                                  



the  sanctions  award,  reasoning  that  while  the  federal  precedent  did  not  "directly  

                                                                                                                                                



support[]"  the  party's  position,  the  party  nevertheless  advanced  a  "  'a  good  faith  

                                                                                                                                                        



argument for the extension, modification, or reversal of existing law' as permitted under  

                                                                                                                                                       

Rule 11."23  

                       



                         We   reached   a   similar   conclusion   in   Luedtke   v.   Nabors   Alaska  

                                                                                                                                                  

                         24   A defendant in that case sought Rule 11 sanctions against a plaintiff,  

Drilling, Inc .                                                                                                                                 

                  



alleging that he "adhered to several frivolous arguments" throughout the course of the  

                                                                                                                                                           

superior court proceedings.25  Several of these arguments we found to be colorable -  

                                                                                                                                                            



             21          See,  e.g.,  Alaska  State  Emps.  Ass'n ,  813  P.2d  at  672-73;  Luedtke  v.  Nabors  



Alaska  Drilling,  Inc.,  834  P.2d   1220,   1228-29  (Alaska   1992).  



             22          Alaska  State  Emps.  Ass'n,  813  P.2d  at  672.  



             23          Id.   



             24          834  P.2d  at   1228-29.  



             25          Id.  at   1228.  



                                                                              -9-                                                                      7193
  


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

not frivolous at all.26  Another argument involved a claim for remedies including back   



pay, which the plaintiff continued to assert even after the superior court had ruled that   

                                                                             27    We conceded that the plaintiff "might have  

back pay was not an available remedy.                                                                                                                          



                                                                                                                                                           



                                                                                                                                                                   



                                                                                                                                                                  



                                                                                                                                                                     



                                                                                                                                          



                                                                                                                                                            



                                                                                                                                                           



                                                                                                                                                             



                                                                                                                                                       



                                                                                                                                                                     



                                                                                                                                                           



                                                                                                                                                             



                                                                                                                                                                     



                                                                                                                                                                 



                                                                                                



                                      


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

                         In 2003 the Alaska Legislature eliminated the public interest exception and                                                        



replaced   it   with   a   narrower   statutory   exception   that   applies   only   to   constitutional  



              40  

                                                                                                                                                           

 claims.           Alaska Building argues that this statutory exception is insufficient, and that  



                                                                                                                                                              

because of it, "citizens' and taxpayers' right" to challenge illegal government action in  



                                                                                                                                                   

the courts "has become a hollow paean."  It claims that because public interest litigants  



                                                                                                                                                            

may now face substantial exposure under Rule 82 if they lose, the Legislature "has left  



                                                                                                                                                               

 government  wrongdoing  in  Alaska  essentially  unchallenged  in  the  courts,"  and  a  



                                                                                                                                                              

judicially-developed remedy like that advanced in the percentage-of-savings claim is  



                                                                                                                                                             41  

                                                                                                                                                    

necessary for addressing government misconduct like what was alleged in this case. 



                                                                                                                      

                         Alaska Building's position does not find direct support in  this court's  



                                                                                                                                                                

precedent or the Alaska Statutes, and the superior court properly concluded that such a  



                                                                                                                                                            

remedy was beyond its authority to grant.  But we have previously acknowledged the  



                                                                42  

                                                                                                                                                 

value of public interest litigation,                                 and federal law provides for a type of recovery  



             39(...continued)  



                                                                               

 ch. 86,  1-2, SLA 2003 (codified at AS 09.60.010(b)-(e)).  



             40          Ch.86,  1-2,              SLA2003(codified                     at AS09.60.010(b)-(e));                      Kronev.         State,  



Dep't of Health &Soc. Servs., 222 P.3d 250, 253-54 (Alaska 2009); State v. Native Vill.  

                                                                                                                                                          

 of Nunapitchuk, 156 P.3d 389, 393-95 (Alaska 2007) (providing the history of ch. 86,                                                           

 SLA 2003 (referred to as House Bill (H.B.) 145)).                                 



             41          The superior court's decision of the merits, which is not before us on  

                                                                                                                                                             

 appeal, lends indirect support to Alaska Building's position.  The court found that the  

                                                                                                                                                            

Agency's agreement with 716 West Fourth violated both the letter and the spirit of the  

                                                                                                                                                            

 state procurement code; it observed that "[a] court finding that this leasing scheme could  

                                                                                                                                                        

be sole-sourced would eviscerate the competitive principles of the state procurement  

                                                                                                                                          

 code."  



             42          See McCabe, 568 P.2d at 991 ("The policy of encouraging public interest  

                                                                                                                                                    

 litigants . . . supports an award of attorney's fees to the prevailing plaintiffs in this and  

                                                                                                                                                           

 all other public interest cases.").  

                                             



                                                                             -13-                                                                       7193
  


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

analogous to what Alaska Building requested.                                       Under the False Claims Act a private                 



party may sue to challenge "a false or fraudulent claim" presented to the United States                                                   

                                                                       43     The  plaintiff  sues  "in  the  name  of  the  

government   "for   payment   or  approval."                                                                                                  



Government" and if successful obtains a civil judgment for the government against a  

                                                                                                                                     

party that attempted to defraud or deceive a government agency.44                                                  The Act authorizes  

                                                                                                                    



treble damages, and the private plaintiff who sues under its provisions may receive 15  

                                                                                                                          

to 30% of the total damages recovered on the government's behalf.45                                                   Since the Act was  

                                                                                                                                              



first enacted during the Civil War, it has proven a successful tool for discovering and  

                                                                                                                                              

discouraging profiteering, corruption, and waste.46  

                                                                                         



                       Alaska Building argues that private citizens and organizations in Alaska  

                                                                                                                                        



should have a similar economic incentive to challenge illegal "claims to government  

                                                                                                                           

                                                                               47   While the analogy to the False Claims  

payment" like the lease agreement in this case.                                                                                         

                                                                       



Act would reasonably lead one to believe that the remedy is legislative, not judicial, we  

                                                                                                                                               



cannot say that Alaska Building's claim lacks a public-policy rationale or an existing  

                                                                                                                                       



analogue (albeit an easily distinguishable one).  

                                                                                      



           43          31  U.S.C.    3729(a)  (2012).  



           44          31  U.S.C.    3730.  



           45          31  U.S.C.    3729,  3730.   



           46          James   B.   Helmer,   Jr.,  False   Claims  Act:  Incentivizing  Integrity  for   150  



                                                                                                        IN.  L.  REV.   1261,  1261-62  

Years  for  Rogues,  Privateers,  Parasites  and  Patriots,  81  U. C 

                                                                                                    AL.  L.  REV.   1,  61-63  (2002)  

(2013);  see  also  Pamela  H.  Bucy,  Private  Justice,  76  S. C 

(concluding  that,  because  of  its  unique  economic  incentives,  the  False  Claims  Act  has  

proven  more effective  than  other  federal  "citizen suit"  provisions in  combating  illegal  

government  action  through  public  interest  litigation).   



           47          United States ex rel. Weinberger v. Equifax, Inc., 557 F.2d 456, 460 (5th  

                                                

Cir. 1977).  

         



                                                                      -14-                                                                 7193
  


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

                                                  Furthermore, therecord contains no evidence that Alaska Building brought                                                                                                                                                                               



the   percentage-of-savings   claim   for   an   improper   purpose.     While   the   Agency  



acknowledged in its motion for sanctions that Rule 11 is intended to deter parties from                                                                                                                                                                                                                             



"needlessly increas[ing] the cost of litigation," it did not argue that Alaska Building had                                                                                                                                                                                                                             



 such a purpose here; it argued only that "[Alaska Building's] request for relief in the                                                                                                                                                                                                                                  



form of 10% of the alleged savings . . . was not supported by existing law."                                                                                                                                                                                                                            And as   



noted, the superior court's sanctions order did not offer a reason for imposing sanctions                                                                                                                                                                                                          



other than that the percentage-of-savings claim was "frivolous."                                                                                                                                                                                    



                                                   In our view, Alaska Building's percentage-of-savings claim was a form of                                                                                                                                                                                                    



"creative advocacy." Without evidence that Alaska Building asserted the claim in order                                                                                                                                                                                                                             



to delay, harass, or increase the costs of litigation, we cannot conclude that the claim by                                                                                                                                                                                                                                  

                                                                                                                                                                                                   48         We acknowledge that the claim  

itself constitutes an "abuse of the judicial process."                                                                                                                                                                                                                                                           



 stood little chance of success, and that a competent attorney would recognize the claim's  

                                                                                                                                                                                                                                                                                                           



tenuousness before filing it.  But as the commentary to the Alaska Rules of Professional  

                                                                                                                                                                                                                                                                                       



Conduct explains, an "action is not frivolous even though the lawyer believes that the  

                                                                                                                                                                                                                                                                                                                          

client's position will ultimately not prevail."49                                                                                                                               We do not interpret Rule 11 to impose a  

                                                                                                                                                                                                                                                                                                                                  



greater obligation on counsel than do the Rules of Professional Conduct.  Because the  

                                                                                                                                                                                                                                                                                                                          



percentage-of-savings claimwas based on "anon-frivolous argument . . . for establishing  

                                                                                                                                                                                                                                                                                          



new law," it was an abuse of discretion to sanction Alaska Building for bringing the  

                                                                                                                                                                                                                                                                                                                          



claim.  

                           



                         48                       For example, a novel claim that in the abstract represents only "creative                                                                                                                                                                        



advocacy" may become an abuse of the judicial process if it is used to justify intrusive                                                                                                                                                                                                             

and otherwise irrelevant discovery.   No such use of the percentage-of-savings claim is                                                                                                                                                                                                                 

evident from the record in this case.                                                                                



                         49                       Alaska R. Prof. Conduct 3.1, cmt.  

                                                                                                                                                                  



                                                                                                                                                            -15-                                                                                                                                                    7193
  


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

V.                    CONCLUSION  



                                           We  REVERSE  the  superior  court's  ruling  that  Alaska  Building's  

                                                                                                                                                                                                                                                    



percentage-of-savings claimwas frivolous and REMAND to the superior court so it may  

                                                                                                                                                                                                                                                                         



                                                                                                                                                                              50  

reexamine the fee award consistent with this opinion.                                                                                                                               

                                                                                                                                                  



                      50                   We note that the attorney's fees award of $2,217.80 was consistent with the                                                                                                                                                          



scheduled award of 20% under Rule 82(b)(2), which is what the Agency requested. But                                                                                                                                                                                          

because the superior court simultaneously granted the Agency's motion for Rule 11                                                                                                                                                                                               

attorney's fees, we assume that the award includes those fees as well and may therefore                                                                                                                                                                     

require adjustment on remand.                                            



                                                                                                                                      -16-                                                                                                                               7193
  


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

BOLGER, Justice, dissenting.            



                           Alaska Civil Rule 11 authorizes sanctions if a pleading or filing is not                                                                     



"warranted by existing law or by a nonfrivolous argument for extending, modifying, or                                                                                      



reversing existing law or for establishing new law." This court has held that "[t]he Rule                                                                            



creates   an   objective   standard   of   'reasonableness   under   the   circumstances,'   and   is  

                                                                                                                                     1   In so holding, this  

intended to be more stringent than a mere 'good faith' formula."                                                                                                       



court has largely adopted federal Rule 11 precedent, which defines a frivolous claim in  

                                                                                                                                                                           

violation of Rule 11 as one that has "absolutely no chance of success."2                                                                            And because  

                                                                                                                                                               

federal law allows for sanctions if claims meet this definition,3  this court has adopted a  

                                                                                                                                                                             

standard that equates frivolity with a lack of merit.4  

                                                                                           



                           In this case, Alaska Building has never supplied an argument suggesting  

                                                                                                                                                         



that its claim had any chance of success.  In response to 716 West Fourth's motion to  

                                                                                                                                                                           



preclude this claim, Alaska Building merely argued that approval of this claim was  

                                                                                                                                                                      



"something the judiciary can do to address [the] corruption and the chilling of public  

                                                                                                                                                                  



              1            Keen v. Ruddy, 784 P.2d 653, 658 (Alaska 1989) (quoting                                                                Golden Eagle  



Distrib. Corp. v. Burroughs Corp.                                    , 801 F.2d 1531, 1536 (9th Cir.1986)).                                          



              2            Brubaker v. City of Richmond, 943 F.2d 1363, 1373 (4th Cir. 1991) (noting  

                                                                                                                                                                 

that a violation of Rule 11 occurs "where the complaint has 'absolutely no chance of  

                                                                                                                                                                          

success under the existing precedent' " (quoting Cleveland Demolition Co. v. Azcon  

                                                                                                                                                                  

Scrap Corp., 827 F.2d 984, 987 (4th Cir.1987))); Eastway Const. Corp. v. City of New  

                                                                                                                                                                      

 York, 762 F.2d 243, 254 (2d Cir. 1985) (noting that sanctions are appropriate "where it  

                                                                                                                                                                            

is patently clear that a claim has absolutely no chance of success"), superseded by rule  

                                                                                                                                                                       

on other grounds as stated in Sorenson v. Wolfson, No. 16-1224, 2017 WL 1043073  

                                                                                                                                                             

(2d Cir. Mar. 16, 2017).  

                                    



              3            See Eastway, 762 F.2d at 254.  

                                                                                



              4            See Alaska State Emps. Ass'n v. Alaska Pub. Emps. Ass'n, 813 P.2d 669,  

                                                                                                                                                           

672 (Alaska 1991) ("ASEA's position was not so devoid of merit as to justify the  

                                                                                                                                                                        

imposition of sanctions.").  

                             



                                                                                   -17-                                                                             7193
  


----------------------- Page 18-----------------------

 interest litigation as a                                                               result of theLegislature'sabrogation of [the] public interest litigant                                                                                                                                                                                               



 exception to [Alaska] Civil Rule 82."                                                                                                                                    But saying that this claim was "something the                                                                                                



judiciary can do" did not suggest a legal theory with any potential for success. Even the                                                                                                                                                                                                                                                                                     



 most outrageous claim could be characterized as "something the judiciary can do."                                                                                                                                                                                                                                                                       



                                                            The   superior  court  thus   concluded   that   Alaska   Building's   claim was  



 frivolous:  



                                                            Here, there is no statutory authority that would allow this                                                                                                                                                                                         

                                                            court to create such an incentive, and [Alaska Building] does                                                                                                                                                                                    

                                                           not provide any legal theory upon which this court could                                                                                                                                                                                    

                                                          justify creating new law.                                                                                       



 I agree with this conclusion.                                                                                                Alaska Building made a claim without any legal theory to                                                                                                                                                                                             



 support it, a claim with absolutely no chance of success.                                                                                                                                                         



                                                            Many Rule 11 decisions evaluate an attorney's conduct by comparing it to                                                                                                                                                                                                                                          



 a hypothetical "reasonable" or "competent" attorney who, after a "reasonable inquiry"                                                                                                                                                                                                                                                                 



 under the circumstances, would not bring a claim that was not "well grounded in fact,"                                                                                                                                                                                                                                                                             



 supported by existing law, or justified by "a good faith argument for the extension,                                                                                                                                                                                                                                                        

                                                                                                                                                                                      5        As we recently explained:  

 modification or reversal of existing law."                                                                                                                                                                                                                        



                                                           An attorney need not have engaged in subjective bad faith or  

                                                                                                                                                                                                                                                                                                                         

                                                           willful misconduct to incur Rule 11 sanctions. . . .  Rather  

                                                                                                                                                                                                                                                                                    

                                                           than  inquiring  into  an  attorney's  good  faith,  courts  must  

                                                                                                                                                                                                                                                                                                          

                                                            determine  "whether  there  was  a  reasonable  basis  for  the  

                                                                                                                                                                                                                                                                                                                 

                                                            attorney's signature at the time the paper was submitted." As  

                                                                                                                                                                                                                                                                                                                     

                                                            a U.S. District Court has noted, "[w]here . . . a plaintiff has  

                                                                                                                                                                                                                                                                                                                  

                                                           made no inquiry or has made an inquiry that has revealed no  

                                                                                                                                                                                                                                                                                                                      



                              5                            Eastway,    762    F.2d    at    254    (emphasis    omitted)    (footnote    omitted)  



 ("[S]anctions shall be imposed against an attorney and/or his client when it appears that                                                                                                                                                                                                                                                                                  

 a pleading has been interposed for any improper purpose, or where, after reasonable                                                                                                                                                                                                                                                        

 inquiry, a competent attorney could not form a reasonable belief that the pleading is well                                                                                                                                                                                                                                                                               

 grounded in fact and is warranted by existing law or a good faith argument for the                                                                                                                                                                                                                                                                                          

 extension, modification or reversal of existing law.").                                                                                                                                                     



                                                                                                                                                                                      -18-                                                                                                                                                                             7193
  


----------------------- Page 19-----------------------

                                                                   information supporting a claim, the inquiry is                                                                                                                                                                                   ipso facto                                        [] not   

                                                                                                                                  [  ]   

                                                                   reasonable." 6 



Therefore, we must look at the inquiry results to determine whether there is a reasonable                                                                                                                                                                                                                                                                                             



basis for an attorney's claim.                                                                                    



                                                                   In   the   present   case,   Alaska   Building's   attorney   did   not   uncover   any  



reasonable basis for its claim by either research or inquiry.                                                                                                                                                                                                                                                At his deposition, Alaska                                                                        



Building's attorney was asked about any statutory basis for Alaska Building's claim; he                                                                                                                                                                                                                                                                                                                                               



replied there was none.                                                                                                    He specifically agreed that this was not a statutory                                                                                                                                                                                                                          qui tam   



claim.   And when asked whether he had found common law support, he replied that he                                                                                                                                                                                                                                                                                                                                                  



had not found any:                                                                              "Well, not yet anyway.                                                                                                    So . . . it's possible I'll come up with some                                                                                                                                                



 [support], but I haven't found . . . any yet."                                                                                                                                                                            



                                                                   In my opinion, the record supports the superior court's decision.  Alaska   



Building made up this claim without any legal research to support it. The claim itself has                                                                                                                                                                                                                                                                                                                                       



no legal basis, and thus had absolutely no chance of success. I would affirm the superior                                                                                                                                                                                                                                                                                                                



court's decision to grant a modest award of attorney's fees as an appropriate sanction to                                                                                                                                                                                                                                                                                                                                               



discourage this type of claim.                                                                                      



                                  6                                Kollander v. Kollander                                                                                                  , ___ P.3d ___, Slip Op. No. 7185 at 9 (Alaska                                                                                                                                                                



July 21, 2017) (second, third and fourth alterations in original) (footnotes omitted) (first                                                                                                                                                                                                                                                                                                                             

quoting  Luedtke v. Nabors Alaska Drilling, Inc.                                                                                                                                                                                                   , 834 P.2d 1220, 1228 (Alaska 1992);                                                                                                                         

then quoting                                                    Foster v. Michelin Tire Corp.                                                                                                                           , 108 F.R.D. 412, 415 (C.D. Ill. 1985)).                                                                                                                                                               



                                                                                                                                                                                                                -19-                                                                                                                                                                                                      7193
  

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