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Strong v. Seaward (5/21/99), 979 P 2d 456
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Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
STRONG ENTERPRISES, INC., )
GREGORY E. STRONG, DOUBLE ) Supreme Court No. S-8420
HORSESHOE INVESTMENTS, and )
BF PROPERTIES, ) Superior Court No.
) 3AN-92-2336 Civil
Appellants, )
) O P I N I O N
v. )
) [No. 5118 - May 21, 1999]
THOMAS L. SEAWARD, )
)
Appellee. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
John Reese, Judge.
Appearances: Louis R. Veerman and Roger P. J.
Belman, Guess & Rudd, P.C., Anchorage, for
Appellants. Douglas O. Moody, Gingras & Moody, L.L.C., and D.
Kevin Williams, Law Office of D. Kevin Williams, Anchorage, for
Appellee.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
EASTAUGH, Justice.
FABE, Justice, concurring in part, and
dissenting in part.
I. INTRODUCTION
The superior court entered final judgment for Thomas
Seaward against his former business partners. It also awarded him
attorney's fees under Alaska Civil Rule 82(b)(2) and costs to
reimburse his accountancy fees. Because we conclude that the
superior court correctly treated the final judgment as a non-money
judgment, we affirm the award of attorney's fees under Civil Rule
82(b)(2) and reject appellants' claim that attorney's fees should
have been awarded under Civil Rule 82(b)(1). Because the
accountancy fee award cannot be sustained under Alaska Civil Rule
79(b) or Alaska Administrative Rule 7(c), we vacate that award.
II. FACTS AND PROCEEDINGS
Thomas L. Seaward was a partner in Bottom Feeder
Properties (BFP), a partnership formed to buy, repair, and sell
repossessed single family residences. Seaward's partners in BFP
were Strong Enterprises, Inc. (SEI), Gregory E. Strong, and Double
Horseshoe Investments (itself a partnership owned by SEI and
Horseshoe Investments). Seaward's partners in BFP are collectively
referred to as "Strong." Seaward also had a half interest in
Gregory E. Strong's interest in Montana Alaska Investments (MAI),
a partnership formed to buy, repair, and sell repossessed
condominiums.
Disputes arose, and BFP and Strong sued Seaward; he
counterclaimed and sued MAI and others.
Following a bench trial, the superior court resolved most
issues in Seaward's favor. The final judgment granted Seaward
accountings for his interests in the BFP and MAI partnerships, and
ordered his partners to pay for his interests contemporaneously
with those accountings, but did not specify the amounts he was to
be paid for those interests. The judgment also stated that "[t]he
money owed to [Seaward] pursuant to this judgment, including monies
due after the required accounting, will bear post-judgment interest
. . . from the date of entry until the judgment is satisfied."
The final judgment awarded Seaward attorney's fees of
$49,863, thirty percent of Seaward's claimed actual fees, under
Alaska Civil Rule 82(b)(2). Upon motion the superior court also
awarded Seaward costs of $5,146.11 to reimburse accountancy fees he
incurred before entry of judgment.
Strong appeals the attorney's fees and costs awards.
III. DISCUSSION
A. Attorney's Fees
The superior court, applying Alaska Civil Rule 82(b)(2),
[Fn. 1] awarded Seaward attorney's fees of thirty percent of the
attorney's fees he claimed he actually incurred. Strong argues
that the superior court instead should have applied Rule 82(b)(1),
[Fn. 2] and should have based Seaward's attorney's fees award on
the amount of Seaward's recovery. Crucial to Strong's argument is
his theory that Seaward received a money judgment.
We will reverse an attorney's fees award for an abuse of
discretion only if the award is arbitrary, capricious, manifestly
unreasonable, or the result of an improper motive. [Fn. 3] Absent
any fact dispute, we consider de novo the legal question whether
the superior court should have applied Rule 82(b)(1), rather than
Rule 82(b)(2). [Fn. 4]
Rule 82(b)(1) applies only if a party recovers "a money
judgment."[Fn. 5] We have defined a money judgment as one that
requires money to "change hands."[Fn. 6] Strong argues that the
judgment here, requiring Strong to pay Seaward for Seaward's share
of partnership profits and interests, meets this definition and
therefore that Rule 82(b)(1) applied.
We disagree. Several circumstances persuade us that
Seaward did not recover a money judgment. The final judgment
required Seaward's former partners to perform accountings and
required Strong to pay Seaward for his interests in two
partnerships. It did not specify the amounts payable, nor did it
specify how the parties should calculate those amounts. It simply
specified the general procedure by which Seaward's total recovery
could be determined. Nor was it merely preliminary to entry of a
more specific judgment. Rather, it was self-executing and did not
require the parties to return to court for approval of the
accountings or the amounts to be paid as determined by the
accountings. Assuming no further disputes, complying with the
judgment would have required no further judicial intervention and
no entry of a specific damages award.
We also note that Strong did not oppose entry of a final
judgment. He did not argue that the judgment was not final or that
the court had to comply with Alaska Civil Rule 54(b) to make it
final. Had the superior court chosen to apply Rule 82(b)(1), fees
could not have been calculated and awarded until after each
accounting was complete. Had the court followed that course, the
final judgment no longer would have been self-executing.
For these reasons, the superior court did not err by
applying Rule 82(b)(2).
B. Accountancy Fees
We will overturn an award of costs only if the superior
court clearly abused its discretion, [Fn. 7] such that the award of
costs was manifestly unreasonable. [Fn. 8]
Seaward filed a cost bill after entry of final judgment.
Under the category "Experts retained as consultants,"he sought an
award of $5,146.11 to pay fees he owed Sramek-Hightower, an
accounting firm he had retained. His preliminary witness list had
listed Robert Sramek, a CPA, as an expert witness. The court clerk
denied this cost item.
Invoking Alaska Civil Rule 79(b), Seaward asked the
superior court to review the clerk's denial. In support, Seaward
cited the court-appointed discovery master's report, issued during
pretrial discovery when Seaward sought production of the
partnerships' books and records; the report recommended that Strong
reimburse Seaward "for any reasonable costs and fees [he had] to
incur to develop the full accounting information of the two
partnerships." The superior court had adopted the discovery
master's recommendations before trial. Seaward's counsel also
affied that Sramek's services "were necessary to reconstruct
accountings for some of the real estate transactions involved in
this dispute."
Over Strong's opposition, the superior court awarded
Seaward the $5,146.11 he claimed for Sramek's services.
Strong attacks the cost award on three grounds: (1) the
superior court impermissibly departed from Alaska Administrative
Rule 7(c); (2) the superior court improperly allowed Seaward to
present materials that had not been before the clerk; and (3) there
was no basis for the award under Alaska Civil Rule 79(b).
Seaward does not directly address Strong's Administrative
Rule 7(c) argument. Rather, he argues that the catch-all provision
of the former version of Civil Rule 79(b), which applied at the
time of the cost award, permits him to recover the cost of Sramek's
services. [Fn. 9] Former Civil Rule 79(b) provided that, "a party
shall be allowed any other expenses necessarily incurred in order
to enable a party to secure some right accorded the party in the
action or proceeding."
Seaward may not recover for Sramek's services under Civil
Rule 79(b)'s catch-all provision for a cost category expressly
addressed in Administrative Rule 7(c). In Yurioff v. American
Honda Motor Co., [Fn. 10] we held that a party may not recover
costs for expert witnesses under the Civil Rule 79(b) catch-all
provision, if the requested costs exceed the limits of
Administrative Rule 7(c). [Fn. 11]
Administrative Rule 7(c) provides for the recovery of
fees paid to expert witnesses. [Fn. 12] Therefore, under Yurioff,
Seaward may not invoke Civil Rule 79(b)'s catch-all provision in
order to recover the accountancy fees as expert witness fees. This
is so even though Administrative Rule 7(c) bars the recovery of
expert fees here because Sramek did not testify. [Fn. 13] So long
as the rationale for recovering Sramek's fees is his status as an
expert witness, Civil Rule 79(b)'s catch-all clause is
inapplicable.
Seaward seems to imply that Administrative Rule 7(c)
should not apply because Sramek was a consulting expert, rather
than a testifying expert witness. Under this theory, had Sramek
testified, Seaward's recovery would have been strictly limited by
Administrative Rule 7(c) and Seaward could not have recovered
Sramek's full fees. It would be anomalous to deny full preparation
costs for expert witnesses who testify under Administrative Rule
7(c), but to award full costs under Civil Rule 79(b) for expert
consultants who do not testify on the theory Administrative Rule
7(c) does not apply. To do so would encourage parties to classify
their experts as consultants so they could recover their full costs
without the limits imposed by Administrative Rule 7(c). We decline
to encourage that sort of circumvention of Administrative Rule 7(c)
even though it means that some costs necessary for litigation
success are potentially not recoverable. We have recognized that
[w]henever tortious injury is inflicted, the
party suffering harm faces, at a minimum, disruption and
inconvenience. In the process of protecting a claim and acting
upon it, an injured party usually expends time, effort and money.
Some of these items are readily quantifiable, while others either
defy valuation entirely or are measurable only when the party
suffering damage is a large organization with a specialized
division to conduct the necessary claims activities. Such costs
normally should be regarded as unrecoverable expenses which arise
due to the inherent friction within our system of damage recovery
through civil litigation. As such, they are not properly included
as items of damage.[ [Fn. 14]]
Seaward contends that the superior court was entitled to
award the costs based on the discovery master's recommendation that
Strong reimburse Seaward "for any reasonable costs and fees [he
had] to incur to develop the full accounting information of the two
partnerships."
We reject this argument. The discovery master's
recommendation did not give the superior court discretion to award
Civil Rule 79(b) costs not otherwise permitted by that rule.
Seaward alternatively argues that, because the discovery
master found that Strong's production of documents was inadequate,
the costs award was a proper discovery sanction under Alaska Civil
Rule 37. Seaward appears to raise this argument for the first time
on appeal.
During discovery, Seaward filed a motion to compel to
obtain copies of the partnerships' books and records not produced
during the initial round of discovery. Strong provided additional
information, but could not provide a check register as requested
because he claimed that one had not been kept. Reasoning that
Alaska partnership law imposes a fiduciary duty on partnerships to
keep such records, the discovery master recommended that Strong be
required to pay the cost, including accountancy fees, of
reconstructing the check register. In making this recommendation,
the discovery master did not rely on or cite Civil Rule 37 or its
subparts; did not mention the words "sanction"or "violation"; and
did not recommend or discuss imposing a "sanction." The discovery
master did complain that Strong failed to supplement his discovery
responses until after Seaward filed a motion to compel. But the
discovery master did not find that Strong had wilfully violated any
outstanding discovery order or that Strong's conduct in discovery
so thwarted the discovery process that the requirements of Civil
Rule 37(g) were necessarily satisfied. Instead, he noted that the
"precise extent of the supplemental materials and written responses
that should have been provided initially, versus those that were
provided after the motion to compel, cannot be determined."
The discovery master did reject as "not credible"
Strong's argument that there were no check registers, and found
that it was "inconceivable"that a business would operate without
a check register or some other means to track income and expenses.
But this finding was not made in context of a request for Civil
Rule 37 sanctions. Considered in isolation, it does not allow us
to hold as a matter of law that the discovery master, if asked to
do so, would have found sanctionable conduct and recommended Civil
Rule 37 sanctions.
Nor did Seaward raise Civil Rule 37, expressly or
implicitly, when he asked the superior court to review the clerk's
refusal to award accountancy fees; Seaward instead relied on the
discovery master's recommendations and Alaska Civil Rule 79(b).
Strong did not discuss Civil Rule 37 either. Because the issue of
wilfulness was not before the superior court, Strong had no reason
to offer evidence on that issue, and did not do so. Likewise, the
superior court made no findings and did not refer to Civil Rule 37
in adopting the discovery master's recommendations and awarding
costs that included the accountancy fees.
We will consider a new argument on appeal only if it
requires no new factual determinations. [Fn. 15] Likewise, we can
affirm a challenged ruling on an alternative ground, but not if
doing so would turn on unresolved material fact disputes.
Seaward's new Civil Rule 37 argument requires factual
determinations, such as whether Strong wilfully failed to comply
with discovery or violated a discovery order. We therefore decline
to consider it and decline to affirm the cost award on this
alternative ground.
We reverse the award of costs to the extent that it
included $5,146.11 for the accountant's services.
IV. CONCLUSION
For these reasons, we AFFIRM the award of attorney's
fees, VACATE the $5,146.11 award of costs for accountant Sramek's
services, and REMAND for entry of an amended judgment.
FABE, Justice, concurring in part, and dissenting in part.
I agree with the court's opinion in all respects except
one: its refusal to address Seaward's argument that the cost award
for Sramek's accounting services should be upheld as an appropriate
discovery sanction. The court concludes that "Seaward appears to
raise this argument for the first time on appeal."[Fn. 1] But
Seaward did argue in the superior court that the trial judge's
discovery order requiring payment of accounting fees to Seaward due
to discovery violations by Strong justified an award of costs
against Strong for Sramek's accounting services. I therefore
disagree that Seaward waived this issue on appeal and believe that
the court should address the sanctions argument on its merits.
The appointed discovery master in this case concluded
that Strong deliberately withheld portions of the partnership books
and business records necessary to resolve the issues in the case.
Specifically, the master found that Strong's "argument that they
have no check registers is not credible. . . . Taking [Strong's]
argument as true would mean that the partners were writing checks
and making deposits without recording them in the checkbook!" The
master recommended that "because the books and records . . . were
in full custody and control of [Strong], but yet they are
incomplete or missing, [Seaward] should be reimbursed for
reasonable costs and fees for having to obtain and recreate the
information fully from the outside sources."
The superior court fully approved and adopted the
discovery master's findings and recommendations, including the
recommendation that Seaward be reimbursed for the cost of
recreating financial information of the partnerships due to
Strong's discovery violations. Seaward hired Sramek to accomplish
this accounting task; at the conclusion of the case, Seaward argued
that the superior court's order adopting the master's
recommendations justified the award covering Sramek's expert
accounting costs:
Furthermore, the discovery master recommended
that the court require the plaintiffs to reimburse Mr. Seaward "for
any reasonable costs and fees they ha[d] to incur to develop the
full accounting information of the two partnerships." The court
subsequently adopted the Master's recommendations. The court
should, therefore, award Mr. Seaward the cost of retaining Mr.
Sramek under the catchall provision of Civil Rule 79(b) and the
Discovery Master's recommendation as adopted by the court. Mr.
Sramek's fees totaled $5,146.11.
In support of his request for costs, Seaward submitted to the trial
court his attorney's affidavit that Sramek's services "were
necessary to reconstruct accountings for some of the real estate
transactions,"as well as an affidavit by Sramek describing the
necessity of his efforts in light of the missing documents and gaps
in discovery.
The court essentially holds that because Seaward did not
refer specifically to Civil Rule 37 in his superior court request
for an award of costs, he has waived the argument that Strong's
discovery violations and the court's resulting discovery order
justify affirmance of the cost award. But while the superior
court's order and the master's underlying recommendations do not
rely on Rule 37, they are based both on the failure to produce
complete records that were in Strong's exclusive control and on the
master's factual finding that Strong's justification for failing to
produce the records was "not credible." In turn, Seaward relied on
these factors when requesting review of the cost award. Strong
neither challenged the master's findings and recommendations nor
appealed the superior court's discovery order adopting them.
The court claims that an evaluation of Seaward's Rule 37
argument would require a factual determination of whether Seaward
willfully failed to comply with discovery or violated a discovery
order. [Fn. 2] But this conclusion overlooks the discovery
master's determination that Strong knew about Seaward's need for
certain information yet still failed to respond to discovery
requests. The master found
that the crucial financial records of the
partnerships sought in the motion to compel are not available when
they should be. Because of their absence, a[n] accurate
determination of each partner's interest . . . cannot be
accomplished without extra costs . . . . The undersigned further
found that most, if not all, of the supplemental responses to
defendant's discovery requests were provided after the motion to
compel was filed . . . . Due to numerous correspondence between
counsel and phone calls, it is inconceivable that plaintiffs had no
knowledge of defendant's needs for supplemental responses prior to
the motion to compel, especially when . . . they were required by
the applicable discovery rule to supplement the responses.
(Emphasis added.) Because this language in the master's order
intimates that Strong violated the "applicable discovery rule"by
knowingly failing to produce needed responses in a timely fashion,
we need not make additional factual determinations to grant Seaward
relief under Rule 37.
Moreover, the court's conclusion is based solely on the
language of Rule 37(b), which addresses a party's failure to comply
with discovery orders. Although Strong might not have expressly
violated an outstanding discovery order, Rule 37(c) allows the
court to impose appropriate sanctions on a party "that without
substantial justification fails to disclose [required]
information." And Rule 37(g) allows the court, when faced with a
party who engages in "unreasonable, groundless, abusive, or
obstructionist conduct during the course of discovery . . . [to]
require such party . . . to pay to any other party the reasonable
expenses . . . caused by the conduct."
I would therefore affirm the award of costs as being
within the superior court's power under Rule 37.
FOOTNOTES
Footnote 1:
Alaska Civil Rule 82(b)(2) provides in part:
In cases in which the prevailing party
recovers no money judgment, the court shall award the prevailing
party in a case which goes to trial 30 percent of the prevailing
party's reasonable actual attorney's fees which were necessarily
incurred, and shall award the prevailing party in a case resolved
without trial 20 percent of its actual attorney's fees which were
necessarily incurred.
Alaska Civil Rule 82(b)(3) permits a court to vary from
the fee schedule described in subsection (b)(1) or (b)(2) if the
court determines that variation is warranted based on a variety of
factors.
Footnote 2:
Alaska Civil Rule 82(b)(1) provides for attorney's fees to be
awarded to a party recovering a money judgment. The rule provides
in part,
The court shall adhere to the following
schedule in fixing the award of attorney's fees to a party
recovering a money judgment in a case:
Judgment
and, if
Awarded, Contested
Prejudgment Contested Without Non-
Interest With Trial Trial Contested
First $ 25,000 20% 18% 10%
Next $ 75,000 10% 8% 3%
Next $400,000 10% 6% 2%
Over $500,000 10% 2% 1%
Footnote 3:
See Hughes v. Foster Wheeler Co., 932 P.2d 784, 793 (Alaska
1997); Dillingham Commercial Co. v. Spears, 641 P.2d 1, 9 (Alaska
1982).
Footnote 4:
See D.L.M. v. M.W., 941 P.2d 900, 902 n.2 (Alaska 1997); Ford
v. Municipality of Anchorage, 813 P.2d 654, 655 (Alaska 1991).
Footnote 5:
Alaska R. Civ. P. 82(b)(1); see also O.K. Lumber Co. v.
Providence Washington Ins. Co., 759 P.2d 523, 528 (Alaska 1988);
Norris v. Gatts, 738 P.2d 344, 355 (Alaska 1987).
Footnote 6:
Atlantic Richfield Co. v. State, 723 P.2d 1249, 1252 (Alaska
1986).
Footnote 7:
See Municipality of Anchorage v. Frank Coluccio Constr. Co.,
826 P.2d 316, 332 (Alaska 1992).
Footnote 8:
See Abbott v. Kodiak Island Borough Assembly as the Assembly,
899 P.2d 922, 925 (Alaska 1995).
Footnote 9:
Now amended, Civil Rule 79 no longer contains a catch-all
provision. However, the amendment did not become effective until
January 15, 1998, one day after the court awarded costs to Seaward.
See Supreme Court Order No. 1306 (October 30, 1997).
Footnote 10:
803 P.2d 386 (Alaska 1990).
Footnote 11:
See id. at 391 (citing CTA Architects of Alaska, Inc. v.
Active Erectors and Installers, Inc., 781 P.2d 1364, 1368 (Alaska
1989) (Rabinowitz, J., concurring)); see also Miller v. Sears, 636
P.2d 1183, 1195-96 (Alaska 1981) (applying Administrative Rule
9(c), which now appears as Administrative Rule 7(c)).
Footnote 12:
Alaska Administrative Rule 7(c) provides in part:
Recovery of costs for a witness called to
testify as an expert is limited to the time when the expert is
employed and testifying and shall not exceed $50.00 per hour,
except as otherwise provided in these rules. . . . For purposes of
this rule, an independent expert is a witness who is retained or
specially employed to provide expert testimony in the case or whose
duties as an employee of the party regularly involve giving expert
testimony.
Footnote 13:
See Atlantic Richfield Co. v. State, 723 P.2d 1249, 1253
(Alaska 1986) (holding that a prevailing party could not recover
expert consultants' fees under Administrative Rule 7(c) where there
was no trial, and thus, no expert testimony).
Footnote 14:
Curt's Trucking Co. v. City of Anchorage, 578 P.2d 975, 981
(Alaska 1978) (footnote omitted).
Footnote 15:
See Sea Lion Corp. v. Air Logistics of Alaska, Inc., 787 P.2d
109, 116 (Alaska 1990) (citing Demoski v. New, 737 P.2d 780, 786
(Alaska 1987); Ransom v. Haner, 362 P.2d 282, 285 (Alaska 1961)).
FOOTNOTES (Dissent/Concurrence)
Footnote 1:
Op. at 10.
Footnote 2:
See Op. at 12.
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