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Diamond Mini-Storage v. Stewart (12/31/92), 843 P 2d 1232
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Notice: This is subject to formal
correction before publication in the Pacific
Reporter. Readers are requested to bring
typographical or other formal errors to the
attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
MATTHEW BOBICH, DENNIS )
MILLARD, individually and ) Supreme Court File Nos.
as owners in M W OF A, INC., ) S-4517/S-4628
a/k/a MWA OF ALASKA, and )
partners in DIMOND SELF ) Superior Court No.
STORAGE, partnership; DIANE ) 3AN-88-11764 Civil
BLACK-SMITH, DAVID RICHARDS, )
BETTY GORDON, individually )
and as partners for DIMOND )
SELF STORAGE also known as )
DIMOND MINI-STORAGE )
partnership, )
)
Appellants and ) O P I N I O N
Cross-Appellees, )
)
v. )
)
SHARON STEWART and JIMMIE ) [No. 3913 -
D. STEWART, ) December 31, 1992]
)
Appellees and )
Cross-Appellants. )
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage, Joan M. Katz, Judge.
Appearances: C.R. Kennelly, Stepovich,
Kennelly & Stepovich, P.C., Anchorage, for
Appellants and Cross-Appellees. Kenneth W.
Legacki, P.C., Anchorage, for Appellees and
Cross-Appellants.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
MOORE, Justice.
This appeal concerns an action by Jimmie Stewart and
Sharon Stewart to recover unpaid overtime compensation and
damages from their employer, Dimond Mini-Storage. At trial, the
jury found that Dimond Mini-Storage was an employer of four or
more employees and thus owed the Stewarts overtime pay under the
Alaska Wage and Hour Act (hereinafter AWHA), AS 23.10.050-.150.
The jury awarded compensatory and liquidated damages to the
Stewarts. In addition, the trial court awarded the Stewarts both
prejudgment interest and attorney_s fees. Dimond Mini-Storage
appeals, and the Stewarts cross-appeal, on a wide range of
issues. We affirm.
I. FACTS AND PROCEEDINGS
From June 1987 through the summer of 1988, Dimond Mini-
Storage, a self-storage facility, employed Jimmie Stewart and
Sharon Stewart to perform the facility_s day-to-day tasks.
Except for an occasional part-time worker, the Stewarts were the
only employees at the mini-storage site itself.
Much of the work involved in running Dimond Mini-
Storage occurred off-site. Matthew Bobich was a general partner
in the partnership that owned Dimond Mini-Storage. He was also a
real estate agent at Alaskan Real Estate. Generally, Bobich
oversaw the Stewarts_ activities and made long-range managerial
decisions. For this work he received a $14,400 management fee,
which the partnership paid to Alaskan Real Estate. In addition,
an employee at Alaskan handled the bookkeeping, the preparation
of monthly reports, the payment of some bills, and the reception
of some of the telephone communications for Dimond Mini-Storage.
The business address of Dimond Mini-Storage was that of Alaskan
Real Estate.
In November 1988, the Stewarts filed a complaint
alleging that Dimond Mini-Storage, in violation of the AWHA,
failed to pay actual or overtime compensation for excess hours
that the Stewarts worked. At trial, Bobich moved for a directed
verdict, arguing, inter alia, that Dimond Mini-Storage had only
three employees and was thus exempt from the AWHA_s overtime
provisions.1 The court denied this motion. Bobich also objected
to a number of the instructions to the jury. In a special
verdict, the jury found Dimond Mini-Storage to be an employer of
four or more people, and awarded damages for unpaid overtime in
the amount of $23,402 for Jimmie Stewart and $21,731 for Sharon
Stewart. In cases involving unpaid overtime, the AWHA instructs
the court to award both the overtime due and the same amount in
liquidated damages. AS 23.10.110(a). The trial court did so.
It also awarded $11,672.12 in prejudgment interest on the award
of compensatory damages. Bobich moved for a judgment
notwithstanding the verdict, but the court denied this motion.
The trial court also awarded the Stewarts $52,068 in attorney_s
fees.
This appeal followed.
II. DISCUSSION
A. INTRODUCTION
The central issue of this appeal is whether any more
than three employees worked at Dimond Mini-Storage at any one
time. Under an AWHA exemption, an employer who employs less than
four employees need not pay them overtime. See AS 23.10.060(1)
(1984).2 Bobich contends that Dimond Mini-Storage employed only
three employees: the Stewarts, and one part-time employee.3 The
Stewarts, on the other hand, argue that Bobich and the bookkeeper
at Alaskan Real Estate should also be counted as employees of
Dimond Mini-Storage.4
The parties also dispute the awards of prejudgment interest and
attorney_s fees.
B. THE NUMBER OF EMPLOYEES AT DIMOND MINI-STORAGE
1. The activities of Bobich or the bookkeeper at
Alaskan Real Estate make these individuals employees of
Dimond Mini-Storage.
Bobich argues that the partnership independently
contracted with Alaskan Real Estate to manage the mini-storage
property. Therefore, Bobich and the bookkeeper were employees of
Alaskan, not Dimond Mini-Storage. He stresses that the fee for
managing the facility was paid to Alaskan Real Estate, not
directly to himself, and that he received fees for managing
property for clients other than the mini-storage. Twice Bobich
challenged the existence of a jury question on this issue, once
through a motion for a directed verdict, and once through a
motion for judgment notwithstanding the verdict. Bobich now
appeals the denial of both motions.
When reviewing a denial of a motion for either a
directed verdict or a judgment notwithstanding the verdict, the
court must decide whether the evidence, when examined in the
light most favorable to the nonmoving party, is such that
reasonable persons could not differ in their judgment. City of
Whittier v. Whittier Fuel & Marine Corp., 577 P.2d 216, 220
(Alaska 1978). Unless reasonable jurors could not differ, we
will affirm the jury_s verdict. Blackford v. Taggart, 672 P.2d
888, 890 (Alaska 1983).
We find that the Stewarts presented sufficient evidence
to raise a question on which reasonable jurors could differ, and
therefore we affirm the jury_s verdict. When determining whether
a party is an employee or an independent contractor, the finder
of fact may rely on several guidelines, which include:
1) the degree of the alleged employer's
right to control the manner in which the work
is to be performed; 2) the alleged employee_s
opportunity for profit or loss depending upon
his managerial skill; 3) the alleged
employee_s investment in equipment or
materials required for his task, or his
employment of helpers; 4) whether the service
rendered requires a special skill; 5) the
degree of permanence of the working
relationship; 6) whether the service rendered
is an integral part of the alleged employer_s
business.
Jeffcoat v. State, Dep_t of Labor, 732 P.2d 1073, 1075-76 (Alaska
1987) (quoting Donovan v. DialAmerica Mktg., Inc., 757 F.2d 1376,
1382 (3d Cir. 1985), cert. denied, 474 U.S. 919 (1985)). Under
this standard, a reasonable jury could conclude that Bobich and
the bookkeeper were employees of Dimond Mini-Storage, and could
reject the argument that Alaskan Real Estate acted in the
capacity of an independent contractor. First, a relationship
between an employer and an independent contractor is generally a
short-term one, but the services of Bobich and the bookkeeper
appear to be of a permanent nature. Moreover, Bobich received a
flat management fee for his services, regardless of whether
Dimond Mini-Storage turned a profit. Finally, both overall
management activities and clerical tasks such as bookkeeping are
integral parts of a business. Managers and bookkeepers are
essential to a business_s operations in a way that a contractor
hired to repaint the office walls is not. Therefore, we conclude
that the special verdict was not in error.5
2. Bobich_s status as a partner in Dimond Mini-
Storage does not exclude him from employee status.
In addition, Bobich argues that because he is a partner
in Dimond Mini-Storage, he cannot also be an employee of the
partnership. Jury Instruction 25 permitted the jury, when
deciding if Bobich was an employee, to consider a state
regulation that gives employee status to certain corporate
officers.6 Because the regulation does not list partners as
falling within its scope, Bobich argues that Instruction 25 is
erroneous. The legal sufficiency of a jury instruction is a
question of law, on which we will exercise our independent
judgment. Beck v. State, Dep't of Transp. & Pub. Facilities, 837
P.2d 105, 114 (Alaska 1992). We hold that Instruction 25 was
proper.
The regulation at issue reflects the general rule that
shareholders are the owners of a corporation, and that the
officers, whom the shareholders hire to manage the enterprise,
are employees. See AS 10.06.010(11). In comparison, partners in
a partnership, like shareholders in a corporation, co-own the
venture. See AS 32.05.010(a). As a rule, a partner receives
nothing for her investment but a share of the profits, and
receives no compensation for any work she does for the venture.
See AS 32.05.130(1), (6). Thus a partner normally would be more
akin to a shareholder than to a corporate officer, and would not
fall within the scope of the regulation.
On the other hand, a partnership agreement may provide
regular compensation, untied to profits, for a partner_s
services. Under these circumstances, a partner looks less like a
shareholder and more like a salaried corporate officer.
Therefore, for the purposes of AS 23.10.060(1), we shall consider
such a compensated partner to be both an owner and an employee.
To do otherwise would permit employers to defeat the AWHA_s
remedial purposes by simply calling paid employees "partners."
Therefore, Instruction 25 to the jury was proper.
C. THE AWARD OF PREJUDGMENT INTEREST
The judgment awarded the Stewarts a sum for unpaid
overtime wages, an equal sum in liquidated damages as AS
23.10.110(a) directs, and a sum representing prejudgment interest
on the unpaid wages alone. Bobich argues that liquidated damages
are meant to substitute for prejudgment interest, and that to
award both amounts to giving the Stewarts a double recovery. The
Stewarts, in contrast, argue that the trial court should have
awarded prejudgment interest for not only the unpaid overtime but
also the liquidated damages.
When awarding prejudgment interest, a court does not
intend to penalize the losing party, but rather intends to
compensate the prevailing party for losing the use of her money
between the date she was entitled to it and the date of judgment.
Bevins v. Peoples Bank & Trust Co., 671 P.2d 875, 881 (Alaska
1983). Accordingly, prejudgment interest is generally not
awarded on punitive damages. Andersen v. Edwards, 625 P.2d 282,
289 (Alaska 1981). However, where an award consists of both
compensatory and punitive elements, to fail to award prejudgment
interest on the compensatory portion would be unfair to the
injured party. Id.
An employer who violates the AWHA must pay two types of
damages: compensatory damages in the amount of unpaid overtime
compensation, and liquidated damages in the same amount. AS
23.10.110(a) (1990). We have held that under the AWHA,
liquidated damages are a form of punitive damages, not a
substitute for compensatory damages. Gore v. Schlumberger Ltd.,
703 P.2d 1165, 1166 (Alaska 1985).7 Because a plaintiff has no
right to use liquidated damages before they are actually awarded,
an award of prejudgment interest would compensate her for a
nonexistent loss. Therefore, we hold as a matter of public
policy that under the AWHA, an employee may not recover
prejudgment interest for liquidated damages.
In this case, the trial court limited prejudgment
interest to the compensatory part of the award. Dimond Mini-
Storage denied the Stewarts not only their overtime pay but the
right to use this money. The award of prejudgment interest thus
made the Stewarts whole, compensating them for this additional
loss. The trial court was correct to award this sum.
D. THE AWARD OF ATTORNEY_S FEES
The Stewarts also moved for an award of $67,972.50 in
attorney_s fees as per AS 23.10.110(c) and Civil Rule 82. Over
Bobich_s objections, the trial court awarded the Stewarts $52,068
in attorney_s fees. The trial court arrived at this figure by
concluding that the Stewarts_ attorney worked 423.9 hours, plus
an additional 10 hours for the work involved in making the motion
for attorney_s fees, and that a reasonable rate for his time was
$120 per hour, rather than the $135 per hour that the attorney
wanted.
In an action under the AWHA, the court "shall, in
addition to a judgment awarded to the plaintiff, allow costs of
the action and reasonable attorney fees to be paid by the
defendant." AS 23.10.110(c) (1990). Alaska Civil Rule 82 sets
up a schedule of attorney_s fees, which is followed "unless the
court, in its discretion, otherwise directs." Alaska R. Civ. P.
82(a)(1). An award of attorney_s fees will be overturned only
when the trial court_s award is manifestly unreasonable and a
clear abuse of discretion. Municipality of Anchorage v. Baugh
Constr. & Eng_g Co., 722 P.2d 919, 929 (Alaska 1986). On the one
hand, because Rule 82 is intended to compensate prevailing
parties only partially, rather than fully, for attorney_s fees,
an award of full attorney_s fees is manifestly unreasonable,
unless the losing party acted in bad faith or engaged in
vexatious conduct. Demoski v. New, 737 P.2d 780, 788 (Alaska
1987). On the other hand, when interpreting a state statute that
expressly calls for an award of reasonable attorney_s fees to
successful plaintiffs, we have held that full fees should be
awarded to claimants as long as those fees are reasonable. See
Boyd v. Rosson, 713 P.2d 800, 802 (Alaska 1986) (interpreting AS
34.35.005(b), which requires the court to allow successful lien
claimants a reasonable attorney fee for foreclosure of a lien),
modified on reh'g, 727 P.2d 765 (Alaska 1986); cf. Ferdinand v.
City of Fairbanks, 599 P.2d 122, 125 (Alaska 1979) (holding that
Rule 82 did not apply to an award of attorney_s fees under the
federal civil rights statute). When awarding attorney_s fees,
the trial court expressly relied on the Boyd holding.
In this case, the logic of Boyd and Ferdinand control.
A state statute, AS 23.10.110(c), expressly requires an award of
reasonable attorney_s fees to the plaintiff. We would have
preferred that the trial court provide a more detailed
explanation of its attorney fee calculations, but the award
itself is fair and reasonable.8 Therefore, the trial court_s
award was not an abuse of discretion.9
III. CONCLUSION
We sustain the jury verdict in favor of the Stewarts,
and conclude that the trial court properly denied Bobich_s
motions for a directed verdict and a judgment notwithstanding the
verdict. We also conclude that Instruction 25 to the jury was
not erroneous. The trial court acted properly when it awarded
prejudgment interest on the compensatory award, but declined to
do so on the liquidated damages. Finally, the trial court_s
award of attorney_s fees did not constitute an abuse of
discretion, and is therefore upheld.
Accordingly, the judgment is AFFIRMED.
_______________________________
1. Alaska Statute 23.10.060(1) (1984) states that the
AWHA_s requirements for overtime pay do not apply to "an employee
employed by an employer employing less than four employees in the
regular course of business."
2. Since the cause of action accrued, AS 23.10.060 has been
amended, and the structure and paragraph scheme of the statute
has been reorganized. However, the language of the exemption has
not been changed. See AS 23.10.060(d)(1) (1990).
3. For the purposes of establishing the number of employees
that an employer has under AS 23.10.060(d)(1), "all part-time
employees will be counted regardless of the number of days or
hours worked." 8 AAC 15.140 (1991).
4. Before trial, Bobich moved for summary judgment on
several issues, including the number of employees at Dimond Mini-
Storage. The Stewarts opposed Bobich_s motion and filed a cross-
motion for summary judgment. They argued that AS 23.10.060(1)
was void, either because the federal Fair Labor Standards Act
(FLSA), 29 U.S.C. 201-219, preempted it, or because the Alaska
provision was vague. The Stewarts also sought to apply either of
two FLSA doctrines--joint employment or enterprise liability--to
the AWHA, in an effort to combine Dimond Mini-Storage with
another establishment in which Bobich held an ownership interest
and thus to create one larger employer with four or more
employees.
Bobich appeals the denial of his motion for summary
judgment on these issues. In addition, a number of the jury
instructions to which Bobich objects also involve questions of
the FLSA_s application. However, when deciding the outcome of
the case, the jury applied the AWHA alone. Because we conclude
that under the AWHA alone, the jury finding that Dimond Mini-
Storage had four or more employees was reasonable, we need not
address the FLSA issues.
5. Bobich contends that Instruction 24 to the jury, which
basically listed the Jeffcoat criteria, invited speculation by
allowing the jury to consider factors other than the six
enumerated ones. Although the instruction called upon the jury
to "consider the following factors, among others,"we think that
the instruction simply directs the jury to apply the criteria in
a nonmechanistic fashion, and is not an invitation for the jurors
to engage in unbridled speculation.
6. When counting the number of employees working for an
employer, "all officers of a corporation who actively engage in
the business . . . will be counted regardless of the number of
days and hours worked." 8 AAC 15.140 (1991).
7. Bobich urges this court to adopt the logic of Brooklyn
Sav. Bank v. O_Neil, 324 U.S. 697 (1945), in which the U.S.
Supreme Court, interpreting the FLSA, held that Congress had in
fact intended liquidated damages to substitute for prejudgment
interest. Id. at 715. Therefore, where the trial court awarded
both prejudgment interest and liquidated damages, the Supreme
Court overturned the interest part of the award as a double
recovery. Id. We have not chosen to read the AWHA in the same
way as the U.S. Supreme Court has read the federal act. See,
e.g., McKeown v. Kinney Shoe Corp., 820 P.2d 1068, 1070 (Alaska
1991); Gore, 703 P.2d at 1166.
8. On cross-appeal, the Stewarts argue that the trial court
erred in not granting them actual attorney fees, presumably as
the Stewarts_ attorney calculated, and a multiplier. Such an
argument has little substance, because the AWHA does not require
that the trial judge use a multiplier. Therefore, the Stewarts
cannot show any manifest abuse of discretion on the part of the
trial court, and the award is proper.
9. Bobich argues that because AS 23.10.110(c) awards
attorney_s fees to the plaintiff, but not the defendant, and
because, allegedly, this rule lacks a rational basis, the
provision thus violates the U.S. Constitution's Equal Protection
Clause. See U.S. Const. amend. XIV. This logic is faulty. The
objective of AS 23.10.110, as Bobich himself understands it, is
to encourage employees to press wage-and-hour claims.
Essentially, Bobich's argument is not that the provision for
attorney_s fees is in itself an irrational means of achieving
that goal, but that other provisions in the statute also achieve
that goal. This position, however, is not sustainable as an
argument against the law_s reasonableness. The effectiveness of
other statutory provisions in achieving an objective does not
render one particular provision irrational.
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