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Novak's Fuel Dist. v. Orca Oil Company (6/10/94), 875 P 2d 756
<![CDATA[
NOTICE: This opinion is subject to formal correction
before publication in the Pacific Reporter. Readers
are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501.
THE SUPREME COURT OF THE STATE OF ALASKA
SCOTT NOVAK, individually and ) Supreme Court
d/b/a NOVAK's FUEL ) No. S-5637/5638
DISTRIBUTORS, )
) Superior Court
Appellant and ) No. 3CO-88-123 CI
Cross-Appellee, )
) O P I N I O N
v. )
) [No. 4091 - June 10,
1994]
ORCA OIL CO., INC. )
)
Appellee and )
Cross-Appellant. )
___________________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Cordova,
Glen C. Anderson, Judge.
Appearances: David H. Shoup, Condon,
Partnow & Sharrock, Anchorage, for Appellant
and Cross-Appellee. Kenneth L. Wallack, Law
Offices of Kenneth L. Wallack, Anchorage, for
Appellee and Cross-Appellant.
Before: Moore, Chief Justice,
Rabinowitz, Matthews, Compton, Justices, and
Bryner, Justice, pro tem.*
BRYNER, Justice, pro tem.
Scott Novak appeals a superior court order dismissing
for want of prosecution his counterclaim against Orca Oil, Inc.,
and awarding Orca attorney's fees. Orca cross-appeals,
contending that the court should have dismissed the counterclaim
with, rather than without, prejudice and that the court erred in
allowing Novak access to certain state investigative files.
I. FACTS
Novak became a retail fuel distributor in Cordova in
1987; he bought fuel from Orca, a fuel wholesaler. In March of
1988, Novak filed a complaint with the attorney general's office,
alleging price-fixing by Orca. The attorney general's office
opened an investigation and obtained pertinent records from Orca
pursuant to an initial request letter and a civil investigative
demand (CID).
Orca subsequently billed Novak for fuel he had
purchased. On September 15, 1988, Novak informed Orca that,
because of damages he had suffered as a result of Orca's unfair
pricing policies, he did not intend to pay. In response, Orca
sued Novak for $19,526.50 it claimed owing on Novak's account.
Novak counterclaimed for damages, alleging breach by Orca of the
Alaska Monopolies and Restraint of Trade Act, AS 45.50.562-.596,
and the Unfair Trade Practices and Consumer Protection Act, AS
45.50.471-.561. Novak contended that he was entitled to an
offset on Orca's claim for his damages.
On October 31, 1988, Novak requested that the attorney
general's office disclose information it had received in its
investigation of Orca. The next day, Novak filed a motion in his
pending civil action for access to the state's investigative
records pursuant to AS 45.50.592(e). The attorney general's
office joined in the motion, while Orca opposed it. Superior
Court Judge John Bosshard granted the motion, finding good cause
for release of the state's investigative records, because Novak's
counterclaim raised issues identical to the issues the state was
investigating.1
Little else happened in the case until July 1991,2
when attorney William Ingaldson entered an appearance as co-
counsel for Novak. Orca responded in August 1991 by moving to
disqualify Ingaldson from representing Novak, alleging that,
while working as an assistant attorney general, Ingaldson had
participated in the state's investigation of Orca's alleged
antitrust violations. At the same time, Orca moved for partial
summary judgment on its claim that Novak owed it $19,525.50.
Novak filed oppositions to Orca's motions in August and September
1991. On November 19, 1991, the trial court granted the motions,
ordering summary judgment on Orca's action for debt and
disqualifying Ingaldson from further participation in the case.3
Another lull ensued. Then, on June 5, 1992, Novak sent
a pretrial memorandum to the court by mail, with a copy to Orca
(also by mail), requesting that his counterclaim be set for
trial. Novak's memorandum spent six days in the mail, reaching
the court on June 11, when it was filed. During the interim, on
June 9, 1992, Orca filed directly with the court a motion to
dismiss Novak's counterclaim pursuant to Alaska Civil Rule 41(e)
for want of prosecution. Orca alleged that the last proceeding
advancing Novak's counterclaim had occurred more than three years
previously, on March 13, 1989, when the court ordered the release
of the state's investigative files.
Superior Court Judge Glen C. Anderson granted the
motion to dismiss, agreeing that Novak had failed to take any
steps to prosecute his counterclaim within the preceding year.
The court dismissed the counterclaim without prejudice, awarded
costs and attorney's fees to Orca, and entered judgment in favor
of Orca on both the claim and counterclaim in the total amount of
$54,851.71. Novak appeals, claiming that the superior
court erred in dismissing his counterclaim for want of
prosecution and in awarding Orca attorney's fees based on the
erroneous dismissal. Orca cross-appeals, asserting that the
court erred in refusing to dismiss with prejudice and in granting
Novak's motion for access to state records.
II. DISCUSSION
A. Dismissal for Failure to Prosecute
Alaska Civil Rule 41(e) authorizes the court to dismiss
a case either on its own motion or on the motion of a party if no
proceeding has been taken in the case for more than one year.4
Before ordering dismissal pursuant to Rule 41(e), the trial court
must undertake a two-step inquiry: it must initially inquire
whether the party facing dismissal has engaged in any proceedings
within the previous one-year period; if not, then it must next
inquire whether good cause exists for the delay. Willis v. Wetco
Inc., 853 P.2d 533, 536 (Alaska 1993).
This court has defined a "proceeding"as "a step, act
or measure of record, by the plaintiff, which reflects the
serious determination . . . to bring the suit to a resolution; or
a step, act or measure of record, by either party, which reflects
that the suit is not stagnant." Power Constructors, Inc. v.
Acres Am., 811 P.2d 1052, 1053-54 (Alaska 1991) (quoting Shiffman
v. K., Inc., 657 P.2d 401, 403 (Alaska 1983)). The occurrence of
a "proceeding""will terminate a period of lapse and preclude the
trial court from dismissing the action." Power Constructors, 811
P.2d at 1054.
In the present case, within the year preceding Orca's
motion to dismiss Novak's counterclaim, attorney Ingaldson had
filed a notice of appearance as co-counsel on behalf of Novak,
Orca had moved to disqualify him on the ground of conflict, and,
following opposition by Novak, the trial court had granted Orca's
motion, precluding Ingaldson's further participation in the case.
In granting Orca's motion to dismiss for want of prosecution,
however, the trial court ruled that these proceedings were not in
furtherance of the counterclaim because, in the judge's view,
they related exclusively to Orca's claim for debt against Novak,
not to Novak's counterclaim against Orca.5
The trial court's ruling assumes that only proceedings
specifically related to Novak's counterclaim would suffice to
prevent dismissal of the counterclaim under Rule 41(e). We have
never had occasion to address this issue. A literal reading of
Rule 41(e), however, provides little support for the trial
court's assumption: the rule speaks broadly of dismissing
"actions"and "cases in which no proceedings have been taken for
more than one year;"it does not mention dismissing "claims" or
"counterclaims."
In any event, we need not resolve the issue here, since
the trial court was clearly erroneous in finding that Orca's
motion to disqualify Ingaldson related exclusively to its claim
of debt and not to Novak's counterclaim. Orca's motion expressed
no such limitation. To the contrary, the motion was primarily
based on Ingaldson's role in the attorney general's antitrust
investigation of Orca -- the subject-matter of Novak's
counterclaim -- and made no mention of Orca's claim for Novak's
unpaid account.
Nor is it significant that the issue of Ingaldson's
representation was raised by Orca rather than Novak, since a
"proceeding" occurs for purposes of Rule 41(e) when a step is
taken by "either party, which reflects that the suit is not
stagnant." Power Constructors, 811 P.2d at 1053-54 (quoting
Shiffman, 657 P.2d at 403). As we stated in Shiffman,
"affirmative action taken by either party terminates the period
of lapse." 657 P.2d at 403 n.4. Here, because the proceedings
concerning Ingaldson's disqualification related to Novak's
counterclaim and reflected that the counterclaim was not
stagnant, they were "proceedings"within the contemplation of
Rule 41(e) and thus terminated the period of lapse.6
Novak's June 5, 1992 trial-setting memorandum also
amounted to a proceeding terminating the Rule 41(e) lapse. The
trial court ruled that the pretrial memorandum could not be
considered for purposes of determining the period of inactivity
on Novak's counterclaim, because the memorandum did not actually
reach the court and was not filed until June 11, two days after
Orca filed its Rule 41(e) motion to dismiss. Yet Novak had
mailed the memorandum to the court, with a copy to Orca, on June
5, four days before Orca moved to dismiss the counterclaim.
Service of the memorandum was complete upon its mailing. See
Alaska R. Civ. P. 5(b). These circumstances render Novak's case
virtually indistinguishable from Zeller v. Poor, 577 P.2d 695
(Alaska 1978).
In Zeller, plaintiff's counsel mailed a request for a
trial date to the court; the request was filed upon its arrival
three days later. Id. at 697. After the request was mailed, but
before it was filed, defendants filed a motion to dismiss
pursuant to Civil Rule 41(e). Id. at 696. This court concluded:
"Under the provisions of Civil Rule 5(b) service was completed
upon mailing, two days before the [defendants] filed their motion
to dismiss. Since service of the trial-setting request was
completed prior to the filing of the motion to dismiss, dismissal
under Civil Rule 41(e) was improper." Id. at 697 (footnotes
omitted).
Orca nevertheless asserts that our more recent decision
in Power Constructors has superseded Zeller. In Power
Constructors, 811 P.2d at 1054, we held that "[a] pretrial
memorandum filed after the court issues its notice of dismissal
does not constitute a 'proceeding' under Civil Rule 41(e)." In
doing so, we cited Radinsky v. Karras, 511 P.2d 935 (Colo. App.
1973), for the proposition that the "filing of the notice to set
trial after the court issued notice to show cause why [the]
action should not be dismissed did not prevent dismissal for
failure to prosecute." Id. at 1054 n.3. Thus, Orca argues that
according to Power Constructors, Novak's memorandum to set the
counterclaim for trial, which was mailed before but filed after
Orca's motion to dismiss pursuant to Rule 41(e), did not prevent
dismissal for failure to prosecute. Id. at 1054 n.3.
In context, however, Power Constructors is inapposite.
Our holding in that case recognized that the purposes of Rule
41(e) "would be considerably compromised if plaintiffs knew that,
no matter how long they delayed, they could avoid dismissal by
filing a pleading of record as soon as the court issued its
notice of dismissal or a party filed a motion to dismiss." Power
Constructors, 811 P.2d at 1054. As should be apparent from this
passage, our concern in Power Constructors was with pretrial
memoranda filed in response to a Rule 41(e) notice of dismissal
or motion to dismiss. We did not purport to deal with the
situation addressed in Zeller, where the motion to dismiss was
filed in the interim between service and filing of the pretrial
memorandum. Under the circumstances in Zeller, and, likewise,
under the circumstances here, the risk of abuse that engendered
our concern in Power Constructors is virtually nonexistent.
Zeller deals directly with this situation, and its holding is
controlling in this case.
We conclude that the trial court erred in finding that
no proceedings relating to Novak's counterclaim had occurred
during the year immediately preceding Orca's motion to dismiss.
For this reason, the order dismissing the counterclaim pursuant
to Civil Rule 41(e) was improper and must be vacated.
B. Disclosure of Investigative Records
We next address Orca's claim on cross-appeal that the
trial court erred in allowing Novak to have access to documents
obtained by the state through the attorney general's antitrust
investigation of Orca.7
Shortly after beginning its investigation of Orca for
antitrust and monopolization violations, the attorney general's
office requested and obtained certain documents from Orca
pursuant to a civil investigative demand (CID).8 In November
1988, Novak moved for disclosure of the state's investigative
records, claiming that the violations targeted in the attorney
general's investigation were identical to those involved in his
counterclaim against ORCA and that, therefore, "[t]he information
sought to be discovered [was] relevant, or [would] likely lead to
relevant evidence, for use in [Novak's] prosecution of his claims
against [Orca]."
After a hearing on the motion, the superior court found
good cause for disclosure, because "the factual and legal issues
in [the] civil case [were] the same as the CID investigation"and
such "shortened discovery"was in the "public interest." The
court granted Novak's motion but expressly provided that Orca
could move for a protective order as to any documents in the
state's files that might be subject to a claim of privilege. At
no point thereafter did Orca seek a protective order.
On cross-appeal, Orca claims that the trial court erred
in ordering disclosure. The State's disclosure of civil
investigative records is addressed in AS 45.50.592(e):
Documentary material produced pursuant
to a [CID], or copies of it, unless otherwise
ordered by a superior court for good cause
shown, may not be produced for inspection or
copying by, nor may its contents be disclosed
to, anyone other than an authorized employee
of the state without the consent of the
person who produced the material.
Here, Orca contends that the trial court mistakenly
equated the statutory requirement of good cause for disclosure
with mere relevance. Orca argues that good cause should require
a showing of substantial need and undue hardship. We have not
previously considered the meaning of the good cause requirement
in AS 45.50.592(e), and the legislative history is devoid of any
definition of good cause.
In arguing for a rigorous definition equating good
cause to substantial need and undue hardship, Orca relies on
State v. Lowry, 802 S.W.2d 669 (Tex. 1991), where, according to
Orca, this standard was adopted under analogous circumstances.
Orca correctly observes that Lowry involved documents obtained
pursuant to a CID and that disclosure of those documents was
subject to a statutory good cause requirement. Id. at 671-72.
However, the Lowry documents were also the subject of a statutory
witness statement privilege, which specified substantial need and
undue hardship as the applicable standard for disclosure of
privileged statements. Noting that a showing of substantial need
and undue hardship would ordinarily suffice to establish good
cause, the Lowry court went on to use this standard, which it
evidently deemed more rigorous, as a point of reference for
analyzing compliance with both the "good cause" requirement of
the CID statute and the "substantial need and undue hardship"
test of the witness statements privilege statute. Id. at 673.
Lowry nonetheless recognized the two standards as distinct,9 and
nowhere did it hold that a showing of substantial need and undue
hardship was a necessary prerequisite to establish good cause.
Accordingly, in our view, Lowry sheds little light on the good
cause issue presented here.
Orca further maintains that the definition of good
cause it proposes can be gleaned from Alaska Civil Rule 26(b)(3),
which permits discovery of certain documents "only upon a showing
that the party seeking discovery has substantial need of the
materials in the preparation of his case and that he is unable
without undue hardship to obtain the substantial equivalent of
the materials by other means." Id. However, this portion of
Rule 26(b) governs disclosure of attorney work product, which
falls within a privilege that has traditionally barred discovery
absent extraordinary circumstances. See generally 4 James Moore,
Moore's Federal Practice 26.64 at 26-352 to 26-389 (2d ed.
1992).
Orca has advanced no cogent reason why good cause for
disclosure, as specified in AS 45.50.592(e), should be equated
with the rigorous standard governing discovery of privileged
information. Nor do we perceive any such reason. The state's
use of CIDs is expressly limited to unprivileged documents:
AS 45.50.592(c)(1) provides that a CID may not "require the
production of documentary material which would be privileged from
disclosure if demanded by a subpoena duces tecum." Moreover, in
the present case, the trial court expressly ruled that Orca could
assert any applicable privilege before the state disclosed its
investigative files to Novak. Despite this ruling, Orca raised
no claim of privilege.
Where, as here, a private party seeks information under
AS 45.50.592(e) in aid of civil litigation against the party from
whom the information was obtained, we think an appropriate
starting point for determining good cause is the general
discovery standard set forth in Alaska Civil Rule 26(b)(1), which
states that "[p]arties may obtain discovery regarding any matter,
not privileged which is relevant to the subject matter involved
in the pending action."
Good cause for disclosure certainly need not be found
in all cases where mere relevance is shown. The issue of good
cause must ultimately be determined by an exercise of the trial
court's sound discretion, based on the court's consideration of
the totality of the circumstances in each case. For this reason,
beyond establishing relevance, as defined in Rule 26(b)(1), as
the starting point for determining good cause under AS
45.50.592(a), we decline to define good cause with greater
specificity. In particular, we think no purpose would be served
in defining good cause so narrowly as to preclude disclosure
under AS 45.50.592(a) when a requesting party shows that the
information to be disclosed would likely be fair game for
discovery in pending civil litigation and is sought for purposes
compatible with the underlying purposes of the state's
investigation. These are essentially the grounds upon which the
trial court ordered disclosure in the present case.
Here, the court expressly found good cause based on the
close similarity between the attorney general's investigation and
Novak's counterclaim. The state joined in Novak's request for
disclosure, and the court's order was expressly tailored to allow
Orca to claim privilege as to any of the documents it had
provided to the state in response to the CID. The trial court
did not abuse its discretion in finding good cause under these
circumstances.10
III. CONCLUSION
The superior court's order dismissing Novak's
counterclaim pursuant to Civil Rule 41(e) for want of prosecution
is VACATED.11 The order allowing disclosure pursuant to
AS 45.50.592(e) is AFFIRMED. This case is REMANDED for further
proceedings in connection with the counterclaim.
_______________________________
* Sitting by assignment made under article IV, section 16
of the Alaska Constitution.
1 Subsequently, the attorney general's office terminated
its investigation of Orca on the ground that "Novak had retained
counsel and was able and willing to pursue this matter
privately."
2 In February 1991, due to the inactivity, the court sent
Novak and Orca notice that the case would be dismissed for want
of prosecution pursuant to Alaska Civil Rule 41(e) unless they
showed good cause within thirty days why it should not be
dismissed. On March 21, 1991, Novak filed a statement indicating
that he had recently substituted counsel and was prepared to move
the case forward. In response, the trial court decided not to
dismiss the case. Neither party contends that the 1991 Rule
41(e) notice has any direct bearing on the issues presented in
this appeal.
3 Novak did not appeal the order granting summary
judgment on Orca's action for debt.
4 Civil Rule 41(e) provides:
(e) Dismissal for Want of Prosecution.
Actions which have been pending in a court
for more than one year without any
proceedings having been taken may be
dismissed as a matter of course, for want of
prosecution, by the court on its own motion
or on motion of a party to the action. The
clerk shall review all pending cases semi-
annually and in all cases in which no
proceedings have been taken for more than one
year, the court shall hold a call of the
calendar or the clerk shall send notice to
the parties to show cause in writing why the
action should not be dismissed. If good
cause to the contrary is not shown at a call
of the calendar or within 30 days of
distribution of the notice, the court shall
dismiss the action. The clerk may dismiss
actions under this paragraph if a party has
not opposed dismissal. A dismissal for want
of prosecution is without prejudice unless
the court states in the order that the case
is dismissed with prejudice.
A lower court's dismissal of an action pursuant to
Civil Rule 41(e) is ordinarily subject to reversal for abuse of
discretion. Willis v. Wetco, Inc., 853 P.2d 533, 534 n.1 (Alaska
1993). To the extent that the lower court's dismissal hinges on
an interpretation of Civil Rule 41(e), however, its ruling
presents a question of law as to which we apply our independent
judgment. Johnson v. Siegfried, 838 P.2d 1252, 1254 (Alaska
1992).
5 In this regard, the judge stated: "It is illogical to
construe Civil Rule 41(e) to reward a dilatory party for his
opponent's diligence in pursuing a separate cause of action."
6 We need not decide whether Ingaldson's July 11, 1991
notice of appearance, standing alone, would have amounted to a
"proceeding" under Rule 41(e). We note, however, that Orca is
mistaken in citing Power Constructors as having decided that
substitution of counsel can never constitute a proceeding under
Rule 41(e). In Power Constructors, this court stated that
"[s]tanding alone, substitution of counsel and the consequent
need for more time to review the case does not constitute good
cause for a . . . delay in prosecution." 811 P.2d at 1054
(emphasis added). The substitution of counsel in that case had
preceded the one-year period of inactivity, and we addressed
substitution only in the context of determining whether the trial
court had abused its discretion in declining to find "good cause"
to deny dismissal -- the second prong of the Rule 41(e) analysis.
Id.
7 Our decision that the superior court erred in
dismissing Novak's counterclaim makes it unnecessary to consider
Orca's separate argument on cross-appeal that the court erred in
failing to dismiss the counterclaim with prejudice.
8 AS 45.50.592(a) provides:
If the attorney general determines that
a person is in possession, custody, or
control of a documentary evidence, wherever
situated, that the attorney general believes
to be relevant to an investigation authorized
in AS 45.50.590, the attorney general may
execute in writing and cause to be served
upon that person an investigative demand
requiring the person to produce the
documentary material and permit inspection
and copying.
9 Specifically, the Texas Supreme Court found that the
defendants had satisfied "the substantial need and undue hardship
requirements of [the Texas witness statement privilege rule] as
well as the burden of establishing good cause under [the CID
statute]." Id. (emphasis added).
10 We reject Orca's related contention that disclosure was
barred by AS 45.50.521(b), which specifies that investigative
records obtained by the attorney general's office by a CID are
not "public records available for inspection by the general
public." Disclosing documents pursuant to a court order based on
a showing of good cause in conformity with AS 45.50.592(e) is not
tantamount to treating the documents as public records.
11 Because we vacate the dismissal of the counterclaim, we
must also vacate the court's award of attorney's fees to Orca,
since the award was calculated on the basis that Orca had
prevailed both on its claim and on Novak's counterclaim. Given
the close relationship between the claim and counterclaim in this
case, and because of Novak's assertion of a right to offset
damages alleged in his counterclaim, we conclude that enforcement
of the summary judgment entered for Orca should be stayed
pursuant to Civil Rule 62(g) pending resolution of the
counterclaim. Attorneys fees can then be redetermined upon
conclusion of the case, based on the ultimate resolution of all
claims.
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