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Alaska Center for the Environment v. Alaska (6/13/97), 940 P 2d 916
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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, telephone (907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
ALASKA CENTER FOR THE )
ENVIRONMENT, ALASKA ) Supreme Court No. S-5776
SPORTFISHING ASSOCIATION, )
LYNN CANAL CONSERVATION, ) Superior Court No.
NORTHERN ALASKA ENVIRONMENTAL ) 4FA-82-2208 CI
CENTER, SIERRA CLUB, )
SOUTHEAST ALASKA CONSERVATION ) O P I N I O N
COUNCIL, SUSITNA VALLEY )
ASSOCIATION, and TROUT ) [No. 4830 - June 13, 1997]
UNLIMITED, )
)
Appellants, )
)
v. )
)
STATE OF ALASKA, )
)
Appellee. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Fourth Judicial District, Fairbanks,
Mary E. Greene, Judge
Appearances: Thomas S. Waldo, Sierra Club
Legal Defense Fund, Inc., Juneau, for Appellants. Brian D.
Bjorkquist, Assistant Attorney General, Anchorage, and Bruce M.
Botelho, Attorney General, Juneau, for Appellee.
Before: Compton, Chief Justice, Rabinowitz,
Eastaugh, and Fabe, Justices. [Matthews, Justice, not
participating.]
FABE, Justice.
I. INTRODUCTION
The Alaska Center for the Environment et al. [Fn. 1]
(collectively, ACE Intervenors) appeal the superior court's
decision not to award them attorney's fees for their intervention
in litigation involving reconstitution of the mental health trust
under State v. Weiss, 706 P.2d 681 (Alaska 1985). We reverse,
holding that the superior court abused its discretion by denying
the ACE Intervenors' motion for attorney's fees.
II. FACTS AND PROCEEDINGS
A. The Mental Health Trust
In 1956, the United States Congress granted one million
acres of federal land to "be administered by the Territory of
Alaska as a public trust"for the benefit of the mental health
program of Alaska. Alaska Mental Health Enabling Act, Pub. L. No.
84-830  202(e), 70 Stat. 709 (1956). The State managed these
lands without maintaining a separate account until 1978 when it
"made its practice law"with the passage of a statutory provision
redesignating the trust land as general grant land. State v.
Weiss, 706 P.2d 681, 682 (Alaska 1985) (citing Ch. 181,  3(a), SLA
1978 (Redesignation Legislation)). In 1982, a class action was
filed alleging that the State "breached the public trust by 1)
failing to account for revenues realized, 2) using revenues for
purposes other than mental health care and 3) passing legislation
redesignating the property 'general grant land.'" Weiss, 706 P.2d
at 682. Members of the class
sought declaratory relief invalidating the
redesignation legislation; injunctive relief compelling the state
to administer the trust according to the law; general relief
establishing a trust account for the receipt of funds generated
from all lands selected by the State of Alaska under the aforesaid
mental health land grant.
Id.
The superior court held that the State breached its
duties as trustee by removing the federal grant lands from the
trust, but it refused to invalidate the Redesignation Legislation.
Id. Instead, the court ordered the State to pay fair market value
for all lands conveyed from the trust as of the date of conveyance
plus interest. Id.
On appeal, we held that "Congress intended to create a
trust, to be based on a corpus of one million acres of federal
land,"and that the State breached its duties as trustee. Id. at
683 & n.3. We invalidated the Redesignation Legislation and
remanded with the direction to reconstitute the trust "to match as
nearly as possible the holdings which comprised the trust when the
1978 law became effective." Id. at 684. In 1985, only about
thirty-five percent of the original trust land remained
unencumbered and in state ownership. The State had transferred
about 50,000 acres to private individuals, 40,000 acres to
municipalities, and 350,000 acres to legislatively designated areas
such as state forests, parks, and wildlife areas.
On remand, several groups intervened in the litigation.
These included the Alaska Mental Health Association et al. (AMHA
Intervenors), Anita Bosel et al. (Bosel Intervenors), and H.L. et
al. (H.L. Intervenors). In 1987, based on discussions among the
parties, the legislature enacted a proposed settlement under which
the State would compensate the trust for the use of former trust
lands by paying "rent"of eight percent of the fair market value of
those lands. Ch. 48,  2, SLA 1987 (Chapter 48). The legislature
repealed Chapter 48 after a dispute arose over the fair market
value of the original trust land and provided instead that the
State would pay six percent of unrestricted general fund revenues
annually to the trust. Ch. 210,  2, SLA 1990. This solution,
however, also foundered due to opposition by some plaintiffs.
After the failure of Chapter 48, plaintiffs obtained a
preliminary injunction prohibiting the State from continuing to
transfer trust lands or any interest in trust lands pending final
resolution of the litigation. In addition, the plaintiffs filed
notice of lis pendens on all original trust lands.
At the end of the 1991 legislative session, the
legislature made another attempt at settlement, known as "Chapter
66." Ch. 66, SLA 1991. Under Chapter 66, the trust would have
been reconstituted wholly through a land exchange. The trust would
have retained approximately half of its original holdings, and
plaintiffs would have nominated land of equal value from other
state land to replace the remainder. The settlement agreement
incorporating Chapter 66 was supported by Weiss and the AMHA
Intervenors (collectively, Settling Plaintiffs), and opposed by the
Bosel and H.L. Intervenors (collectively, Dissenting Plaintiffs).
As security to ensure that the State complied with the
process to reconstitute the trust, Chapter 66 "hypothecated"[Fn.
2] certain lands to the mental health trust. The Department of
Natural Resources prepared a list of these lands (Hypothecated
Lands List) and provided it to the Settling Plaintiffs, but it was
kept confidential and not revealed even to legislators until after
the governor signed Chapter 66 into law. The superior court
explained the role of the hypothecated lands as follows:
Title to the land remains in the State unless
the State defaults on its obligations to return original mental
health trust lands to the trust . . . , to convey substitute lands
to the trust . . . , or to allocate funds to the Trust Income
Account. . . . If the State defaults or if the trust is not
reconstituted by December 1, 1994, the hypothecated lands can be
foreclosed in a manner to be determined by the Alaska Supreme
Court.
B. The Intervention by the ACE Intervenors
In response to the passage of Chapter 66, the ACE
Intervenors moved to intervene in the litigation. The superior
court granted the motion by stipulation, and the ACE Intervenors
filed a complaint December 3, 1991. Their intervention took three
forms: (1) their opposition to the joint motion to modify the
preliminary injunction and release the lis pendens (lis pendens
motion); (2) their summary judgment motion on their complaint in
intervention (summary judgment motion); and (3) their opposition to
the motion for preliminary approval of the settlement agreement.
1. The opposition to the lis pendens motion
After the Settling Plaintiffs and the State submitted the
proposed Chapter 66 settlement agreement to the superior court for
preliminary approval, they jointly moved to modify the preliminary
injunction prohibiting the State from transferring trust lands or
any interest in trust lands pending final resolution of the
litigation. They also moved to release the lis pendens on the
original trust lands that the State or a municipality had conveyed
or had agreed to convey to a third party.
The ACE Intervenors opposed this motion, arguing:
The problems with the joint motion stem
from two provisions. First, the plaintiffs are allowed to reassert
their claims to the disputed third party land if the settlement
does not win final court approval. This will, of course, lead to
additional litigation over competing claims to trust land. Second,
if any of the trusts' [sic] claims are cut off as a result of the
joint motion, the State must compensate the trust, almost certainly
through exchanges of other public lands. This will lead to
controversy and likely litigation not only between the State and
plaintiffs over the value of lands, but with local residents and
citizens who are opposed to the loss of additional public lands to
the trust. . . .
Moreover, this mess may not result in any
meaningful relief to the third parties that supposedly stand to
benefit. In the plaintiffs' view, the motion prevents the creation
of any new bona fide purchasers, allowing the plaintiffs to
reassert all claims to the disputed land. . . . If this view is
correct, the joint motion is nothing more than a temporary, cruel
hoax played on the third parties. The plaintiffs will be able to
snatch back the land the motion purports to release.
If the plaintiffs' view is incorrect, the
burden of the parties' failure will fall on the multitude of
Alaskans who use the public lands for all their diverse purposes.
The State will have to exchange lands currently designated for
multiple use in the broad public interest to the trust for mental
health purposes.
The Dissenting Plaintiffs also opposed the motion. They
argued, along with the ACE Intervenors, that granting the lis
pendens motion would provide only illusory relief to third parties.
In addition, the Dissenting Plaintiffs argued that releasing the
lis pendens would place the plaintiff class at risk if the proposed
settlement did not take effect.
The trial court denied the motion in January 1993,
adopting several of the arguments advanced by ACE. Specifically,
the court stated that "[i]f the settling plaintiffs are correct and
no bona fide purchasers can be created, the 'relief' in this motion
becomes nothing more than a cruel hoax visited on the third
parties." The superior court also agreed with the Dissenting
Plaintiffs that granting the motion would subject the class to
undue risk if the settlement failed. In addition, the court agreed
with the ACE Intervenors that if the Settling Plaintiffs were
incorrect and the plaintiffs could not reassert their claims to the
land, "the public interest may be adversely affected by the
transfer of additional public lands over and above the original
trust lands"to compensate the trust.
2. The summary judgment motions
The superior court next considered the ACE Intervenors'
complaint challenging Chapter 66. Four of their eleven claims
alleged that the adoption of the Hypothecated Lands List violated
the state constitution; two alleged that the process for selecting
land for the reconstituted trust violated statutory safeguards; two
dealt with the inclusion of mineral lands in the trust; one
addressed the management of all lands in the reconstituted trust;
one addressed the management of forest lands returned to the trust;
and one alleged that the appropriation of land to the trust
violated the state constitution.
The ACE Intervenors requested the superior court to
"[r]efuse to approve the proposed settlement of this litigation as
set forth in Chapter 66." They also asked the court to enter
declaratory judgments in accord with their claims that Chapter 66
violated the constitution, the State's fiduciary duty, and the
Alaska Statehood Act. Alternatively, if the court would approve
the settlement, the ACE Intervenors requested that it enter
declaratory judgments that the Trust Authority is not exempt from
statutory mandates governing land use, classification, and
management. Finally, the ACE Intervenors requested an award of
costs and attorney's fees.
On summary judgment motions by the ACE Intervenors, the
State, and the Settling Plaintiffs, the superior court ruled in
April 1993 for the ACE Intervenors on their claim that the adoption
of the Hypothecated Lands List unconstitutionally delegated
legislative power. The court also ruled for the ACE Intervenors on
their claim that the conveyance of substitute land to the trust was
subject to "the planning and classification provisions of AS 38.04
and AS 38.05." The court ruled against the ACE Intervenors on all
the other claims. The ACE Intervenors, the State, and the Settling
Plaintiffs all appealed. [Fn. 3]
3. The opposition to preliminary approval of the
settlement agreement
The superior court next turned to the motion by the State
and the Settling Plaintiffs for preliminary approval of the
settlement agreement. The ACE Intervenors argued that the proposed
settlement was not in the public interest because it excluded the
public from involvement in managing and selecting large tracts of
public land for the trust and injured the public by removing that
land from public use.
On December 30, 1993, the superior court entered a
decision denying the motion for preliminary approval. Although it
found that the agreement was the product of "serious, informed,
noncollusive negotiations"and rejected the ACE Intervenors'
argument that the proposed settlement was not in the public
interest, the superior court concluded that the agreement had
"serious deficiencies." It stated:
The agreement provides for termination at will
by either party at any time, even after final approval of the
settlement, when specific events arise. Specifically, the
agreement allows either party to terminate the agreement: (1) if
the superior court does not cancel the lis pendens and modify the
preliminary injunction issued in July 1990, within 120 days of
presentation of the motion to accomplish that goal; (2) if a "final
order"is entered which requires the application of the land use
planning provisions of AS 38.04 and AS 38.05 to the reconstitution
of the trust; (3) if a "final judicial order"declares the
hypothecation of the lands on the Hypothecated Lands list to be
ineffective; and (4) if it is "finally held"that conveyance of the
mineral estate of the original trust lands or substitute lands to
the Alaska Mental Health Trust Authority is a violation of section
6(i) of the Alaska Statehood Act. The first three of these events
have already occurred. Thus, either party may terminate the
agreement at any time for any reason, even one unrelated to the
problem. These termination provisions make the agreement illusory;
it is not binding on either side. Moreover, the provisions
conflict with the court's obligation in class actions to protect
the rights of unnamed class members, who are bound by the
litigation even though they never participate in it. Additionally,
the court has serious concerns about the enforceability of the
agreement without the hypothecation of state lands.
The trial court stated that "[i]f the serious deficiencies noted
are corrected, the parties may resubmit their agreement."
The superior court also considered the impact of the ACE
Intervenors' successful claims on the viability of the settlement
agreement. It found the invalidation of the Hypothecated Lands
List to be particularly troubling:
The hypothecated lands were the security
for the state's performance. . . .
The court believes that any agreement
reached by the parties must have workable enforcement guarantees to
warrant final approval. The hypothecation option, had the list
been validly adopted, was a sufficient enforcement guarantee. It
is not clear to the court that the other options are sufficient.
If nothing is changed, the settling parties would carry a heavy
burden at final approval to prove that there were sufficient
enforcement guarantees.
In its conclusion, the trial court reiterated its "serious concerns
about the enforceability of the agreement without the hypothecation
of state lands." In addition, the court commented that although
its ruling that the reconstitution of the trust was subject to land
classification and planning requirements would not prevent
preliminary approval, "the question remains whether the agreement
is 'doable' if reconstitution is subject to [those] provisions."
Following the court's decision, the State abandoned
implementation of Chapter 66, and the legislature adopted a new
approach to settlement in a special session following the regular
1994 legislative session. Chs. 5, 6, FSSLA 1994. This proposal,
known as HB 201, adopted many of the Chapter 66 provisions to
improve the mental health program, but reconstituted the trust with
a specific "land package,"$200 million, and other benefits such as
the creation of the Alaska Mental Health Trust Authority and
special funding mechanisms. The superior court granted final
approval to the HB 201 settlement on December 6, 1994.
C. The ACE Intervenors' Motions for Attorney's Fees
The ACE Intervenors requested attorney's fees and costs
incurred during their intervention. In August 1994, the superior
court denied these motions, finding that the ACE Intervenors were
not "the prevailing party." It reasoned:
The [ACE] Intervenors raised eleven issues,
many of which were complex, constitutional issues of first
impression. They prevailed on two of those issues: (1) the
legality of the hypothecated lands list included in Chapter 66 and
(2) the applicability of the land use planning provisions of AS
38.04 and AS 38.05 to the reconstitution process. These two issues
were not the most important in the case nor can they be
characterized as the "main issue"in the case. The [ACE]
Intervenors maintain that they are the prevailing party, because
their actions led to the satisfaction of their goal, viz. the
rejection of the Chapter 66 settlement.
This argument fails for two reasons.
First, it is factually incorrect. The court denied preliminary
approval to the Chapter 66 settlement agreement because the
agreement was flawed. It allowed unilateral termination of the
agreement if any of four circumstances arose. Three of those had
arisen, two as the direct result of the [ACE] Intervenors'
endeavors. However, the problem with the agreement would have
existed even if the [ACE] Intervenors had not entered the lawsuit.
The court would still have denied the request to modify the
preliminary injunction and release the lis pendens on private
third-party purchasers' land. That would have made the automatic,
unilateral termination possible. The court would have denied
preliminary approval.
Second, the argument is legally
incorrect. Whether a party prevails in litigation is not
determined by whether the goals are met, but rather whether the
party succeeds on the main issue in the case. An example may
illustrate the difference. A party may sue another with the goal
of forcing that party into bankruptcy. That goal may be achieved
despite the fact that the plaintiff does not prevail on the main
issue in the case, which is unrelated to the bankruptcy. The costs
of litigation and the impact of the litigation on the defendant's
business may accomplish the goal.
The superior court reaffirmed its position in March 1995. The ACE
Intervenors appeal.
III. DISCUSSION [Fn. 4]
A prevailing party under Alaska Civil Rule 82 [Fn. 5] is
a party "who has successfully prosecuted or defended against the
action, the one who is successful on the 'main issue' of the action
and 'in whose favor the decision or verdict is rendered and the
judgment entered.'" Adoption of V.M.C., 528 P.2d 788, 795 n.14
(Alaska 1974) (quoting Buza v. Columbia Lumber Co., 395 P.2d 511,
514 (Alaska 1964)). With few exceptions, the party who obtains an
affirmative recovery is considered prevailing. Hillman v.
Nationwide Mut. Fire Ins. Co., 855 P.2d 1321, 1327-28 (Alaska 1993)
(finding only two cases "where the party who obtained an
affirmative recovery"was properly held not to be the prevailing
party). We do not require a party to prevail on all the issues in
the case to be a prevailing party. Day v. Moore, 771 P.2d 436, 437
(Alaska 1989) (holding that plaintiff who succeeded in one of three
claims and defeated a counterclaim was prevailing party).
The ACE Intervenors contend that approval of the Chapter
66 settlement agreement was the main issue in this case. We agree.
As the ACE Intervenors point out, the rejection of the settlement
agreement was the focus of their intervention and the "principal
relief"they sought. The State suggests no alternative conclusion.
Indeed, both the State's arguments and the superior court's
decision confirm our view; while never expressly identifying the
main issue, the State and the trial court analyze the success of
the intervention solely in relation to the preliminary approval
decision.
Having identified the main issue, we need take only a
short step to conclude that the ACE Intervenors were prevailing
parties. Although the superior court did not adopt all of the ACE
Intervenors' arguments or vindicate all their claims, it
unambiguously denied preliminary approval of the settlement
agreement. The ACE Intervenors were thus "successful on the 'main
issue' of the action"and "the decision or verdict [was] rendered
and the judgment entered"in their favor. Hillman, 855 P.2d at
1327 (citations omitted). Therefore, we hold that the ACE
Intervenors were a prevailing party, and the superior court abused
its discretion in denying their motion for attorney's fees.
The State, echoing the reasoning of the superior court,
argues that rejection of the settlement agreement represented
merely the achievement of the ACE Intervenors' "goal,"not
"relief." It contends that a "'goal' merely reflects the party's
policy agenda, and may or may not be directly tied to the party's
legal claims,"while "'[r]elief' . . . is what the party requests
the trial court grant as a direct consequence of the party actually
winning on legal claims." The State concludes that, because the
"ACE [Intervenors'] efforts did not lead directly . . . to the
materialization of their goal"and the superior court would have
denied preliminary approval even if they had not intervened in the
litigation, the superior court properly denied them attorney's
fees.
We do not accept the State's premise that prevailing
party status depends on whether a party's legal arguments
"directly,""primarily,"or necessarily cause the court's favorable
decision. The State does not cite any authority for this position,
and we find no precedent to support it. Indeed, such an approach,
akin to "causation"analysis in tort law, places the trial court in
the awkward position of attempting to evaluate the impact of a
party's arguments on the court's own decisions. The result, no
matter how fair-minded the court, would be a highly subjective
ruling. Therefore, we disagree that the superior court properly
based its decision on an assessment of ACE's role in causing it to
reject the settlement agreement. Rather, the superior court should
have asked the simpler and more objective question of whether ACE
obtained the relief it sought.
This case, involving many parties seeking a myriad of
overlapping objectives in multi-stage litigation, presents a more
complex situation than a case involving a dispute between two
parties over money damages. The causal relationship between the
legal claims and arguments and the final result was far from
straightforward or "direct." However, the complexity of this
litigation does not justify abandoning the basic principles that
govern the determination of prevailing party status. By attempting
to weigh the relative importance of the ACE Intervenors'
contributions to its rejection of the settlement agreement, the
superior court overlooked the fundamental fact that the ACE
Intervenors won the ruling they sought. The superior court's
decision unfairly denied the ACE Intervenors the benefit of Rule 82
and must therefore be reversed. [Fn. 6]
IV. CONCLUSION
For the above reasons, we hold that the superior court
abused its discretion by not granting the ACE Intervenors' motions
for attorney's fees. We therefore REVERSE the superior court's
decision and REMAND for further proceedings consistent with this
opinion.
FOOTNOTES
Footnote 1:
The Alaska Sportfishing Association, Lynn Canal Conservation,
Northern Alaska Environmental Center, Sierra Club, Southeast Alaska
Conservation Council, Trout Unlimited, and Susitna Valley
Association join this appeal.
Footnote 2:
Black's Law Dictionary 742 (6th ed. 1990) defines
"hypothecate"as follows: "To pledge property as security or
collateral for a debt. Generally, there is no physical transfer of
the pledged property to the lender, nor is the lender given title
to the property; though he has the right to sell the pledged
property upon default."
Footnote 3:
This court granted the ACE Intervenors' motion to dismiss
these appeals, except for the attorney's fee issue, as moot on
April 14, 1995.
Footnote 4:
We review an award of attorney's fees for abuse of discretion.
Hillman v. Nationwide Mut. Fire Ins. Co., 855 P.2d 1321, 1326
(Alaska 1993). Designation of the prevailing party is committed to
the broad discretion of the trial court. Id. We will affirm the
trial court's determination unless it is arbitrary, capricious,
manifestly unreasonable, or improperly motivated. Id.
Footnote 5:
Alaska Civil Rule 82(a) provides:
Except as otherwise provided by law or
agreed to by the parties, the prevailing party in a civil case
shall be awarded attorney's fees calculated under this rule.
Footnote 6:
We distinguish this holding from our recent decision in State,
Department of Natural Resources v. Tongass Conservation Society,
931 P.2d 1016 (Alaska 1997). There we held that the award of costs
and attorney's fees to Tongass was dependent on resolution of a
nonjusticiable question and thus had to be reversed. Id. at 1020.
Here we are not called upon to inquire into why the legislature
failed to take particular action, but whether ACE prevailed in the
context of particular motions presented to the superior court for
its determination.
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