 |
|
You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Central Bering Sea Fishermen's Assoc. v. Anderson (9/6/2002) sp-5623
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,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
CENTRAL BERING SEA )
FISHERMEN'S ASSOCIATION ) Supreme Court No. S-9955
and CARL MERCULIEF, )
)
Appellants, ) Superior Court No.
) 3AN-98-10450 CI
v. )
)
SUSAN D. ANDERSON, ) O P I N I O N
)
Appellee. ) [No. 5623 - September 6, 2002]
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Peter A. Michalski, Judge.
Appearances: Susan Orlansky, Jeffrey M.
Feldman, Ruth Botstein, Feldman & Orlansky,
Anchorage, for Appellants. Timothy J.
Petumenos, Peter C. Nosek, Birch, Horton,
Bittner & Cherot, Anchorage, for Appellee.
Before: Matthews, Eastaugh, Bryner, and
Carpeneti, Justices. [Fabe, Chief Justice,
not participating.]
MATTHEWS, Justice.
I. INTRODUCTION
A jury awarded Susan Anderson compensatory and punitive
damages against Central Bering Sea Fishermen's Association and
its president, Carl Merculief, based upon her claims of
constructive retaliatory discharge, promissory estoppel, and
defamation. The Association and Merculief challenge various
aspects of the damages awards. We agree that the jury's award of
lost earnings is excessive; however, we sustain the jury's
punitive damages award.
II. FACTS AND PROCEEDINGS
Central Bering Sea Fishermen's Association is a
nonprofit economic development organization established by
fishermen in St. Paul in the Pribilof Islands in conjunction with
the community development quota program ("CDQ"). The program was
instituted by the North Pacific Fisheries Management Council to
allocate a portion of the fisheries' resource to the coastal
villages of western Alaska. Carl Merculief was the president of
the Association in 1997 and 1998.
In late 1997 Susan Anderson approached the Association
about working for it as an economic development project
coordinator. At the time, Anderson held a similar job with Yukon
Delta Fisheries Development Association, another CDQ group.
After Anderson's first interview, Merculief told her that he
would like to hire her but that he needed the approval of the
Association board of directors.
In January 1998 Merculief asked Anderson to start work
with the Association, as Kathy Faltz, the office manager and
controller, had suddenly fallen ill and Merculief needed help
with the corporation's accounting. At a January 9 meeting of the
Association board of directors, which Anderson attended,
Merculief proposed hiring Anderson to do economic development
work. After some discussion, the board agreed to hire Anderson
and to pay her initially at the rate of $55,600 annually. The
board also promised to give Anderson a written contract and to
raise her salary to $60,000 if she successfully concluded a
probationary period. The board instructed Anderson and Merculief
to negotiate an employment contract to present to the board for
approval after the completion of her probation.
Anderson began work on January 16, 1998. She performed
some of Faltz's bookkeeping supervision and accounting duties in
addition to her economic development responsibilities. Despite
the burden of additional duties, Anderson performed well in her
economic development work. During this time, personnel working
for Anderson began to approach her to report irregularities and
potential theft of Association assets by Faltz. When Anderson
reported these allegations to Merculief, Merculief refused to
look into the matter, citing Faltz's current illness.
In early April 1998 Anderson and Merculief negotiated a
draft employment contract to present to the board. The board was
to consider the proposed contract at its April 13 meeting;
however, at the meeting the Association's attorney Roger DuBrock
had a different version of the draft contract. The confusion
over the multiple drafts of the contract was compounded by
discussion of where this economic development position should be
located - St. Paul or Anchorage - and whether or not the position
should continue to exist if the Anchorage office closed.
Anderson explained to the board the advantages of having an
office in Anchorage and told the board that she would not be able
to live and work on St. Paul. Due to the confusion over the
multiple contract drafts and the contingency of the position on
office location, the board voted not to approve Anderson's
contract at that time; however, the board nonetheless assured
Anderson that she was doing a good job and implied that it would
approve a contract at a later date.
Shortly after this board meeting, on April 16, the
Association's day-to-day bookkeeper reported to Anderson that
Merculief had been charging personal expenses to the
Association's credit card without submitting the proper
reimbursements. Follow-up on this report revealed multiple
instances in which Merculief appeared to have misappropriated
company funds. Anderson informed two board members of the
problem and asked if she had the authority to look into this
matter. The board members responded that she did. On April 23,
1998, Anderson brought her concerns to DuBrock, the Association's
attorney. DuBrock responded that they had to proceed very
carefully, as making these allegations could threaten Anderson's
job.
The next morning, Merculief met Anderson at her office
and, without explanation, told her to go home. Merculief then
called DuBrock, insisting that he wanted to fire Anderson, but
DuBrock advised that any action against Anderson would have to be
taken by the board. That same day, the board met and decided
that while it would order an audit to look into Anderson's
allegations, Anderson would be suspended without pay. In
addition, the board ordered that the locks to the Association
offices be changed and that Anderson be instructed not to return
to the Association and not to speak with any representative of
the Association other than DuBrock. No one informed Anderson of
the board's actions; however, Anderson received a call that same
day from an industry colleague who had been told that Anderson no
longer worked at the Association and that she had been fired.
These statements convinced Anderson that she was being fired and
on Monday morning she went to DuBrock to turn in her office keys
and cell phone. She brought along a memorandum to which she had
attached copies of business records documenting her concerns
about Merculief's use of Association funds. Later that morning,
DuBrock delivered to Anderson a letter in which he issued the
board's orders and informed her that she had until May 1, 1998,
to document her concerns about fraud. Anderson retained
counsel. On April 30, 1998, she wrote Du Brock, through counsel,
and demanded her job back, asserting that she had a de facto
contract for a definite term with the Association. She also
warned that the Association's actions were improperly
retaliatory.
The next day Merculief contacted Glenn Haight, the CDQ
manager for the state, and reported that Anderson had falsely
accused Merculief of misappropriation and that she would be
terminated for her misconduct. Merculief also told Haight that
Anderson had threatened previous colleagues both personally and
professionally. Haight passed along Merculief's remarks in an e-
mail sent to a number of high officials in state government as
well as members of the CDQ industry.
On May 7, 1998, the Association board held a meeting
in which Anderson was accused of: (1) breaking into Association
offices; (2) illegally accessing the Association's computers; (3)
stalking Merculief; (4) making death threats; and (5) retaliating
against the Association by accusing Merculief of wrongdoing after
she was suspended. Neither of the two board members that
Anderson had approached with her concerns voiced their knowledge
that Anderson had raised her concerns prior to her suspension,
not after.
The board had DuBrock send a letter to Anderson
explaining that the reason for her suspension was that an
employee had told the board that Anderson was out to destroy
Merculief. However, that employee reported to Anderson that the
board's representation of her statement to them was untrue, that
those present at the May 7 meeting wanted Anderson "gone," and
that no one on the board cared about the Association's finances.
Meanwhile, DuBrock commissioned an audit to examine the
nine instances of fiscal concern that Anderson had identified.
The board reviewed this audit - the results of which supported
most of Anderson's concerns - at its May 22, 1998 board meeting.
At that meeting Merculief alleged that Anderson had instructed
him to engage in misconduct; Anderson denied these allegations at
trial.
After some indecision as to what to do with Anderson,
the board offered her the economic development job on St. Paul.
The board simultaneously reelected Merculief president, moved his
position to St. Paul, and named as Anderson's supervisor a
successful applicant for an internship that Anderson had created
and advertised. Furthermore, the board did not offer Anderson a
contract; instead, it appeared that her employment would be at
will. When Anderson talked to others to investigate the
sincerity of the offer, she found that the offer was "just a way
[for the Association] to get rid of her." She thus declined to
appear in St. Paul by September 1, 1998, as instructed. DuBrock
wrote Anderson's attorney on September 11, 1998, asserting that
the corporation considered Anderson's failure to appear a
resignation.
In order to protect herself, Anderson had begun
circulating resumes and applying for jobs during the summer and
fall of 1998. She accepted employment with Bank of America in
mid-September at $45,000 per year. After the bank was sold in
December 1998, Anderson quit her job at the bank and decided to
go to school to become a barrister in Australia.
Anderson filed suit against the Association and
Merculief in November 1998. She went to trial in April 2000 on
three causes of action: (1) constructive retaliatory discharge;
(2) promissory estoppel; and (3) defamation. She brought the
first two charges against the Association only; they are
alternative theories behind Anderson's claim that she was
wrongfully terminated, for which she sought past and future lost
wages. Anderson based her defamation claim on nine statements
made about her by Merculief and other Association agents.
Anderson claimed, and the court concluded, that most of these
statements were defamatory per se.
The jury found for Anderson on both of her theories of
wrongful termination and awarded her $20,000 for lost back wages
and $217,000 in lost future wages. The jury based the back pay
award on the difference between Anderson's annual salary at the
Association and her annual salary at Bank of America. They
determined the future lost wages award by comparing the income
Anderson would have had if she had remained at the Association
for the duration of her working life with the income she would
have had if she had remained at Bank of America until retirement.
The jury also found that Anderson proved all nine of
the defamatory statements she asserted. They held Merculief
responsible for eight of those statements and the Association
responsible for two of them (including one that had also been
attributed to Merculief). The jury awarded Anderson $15,000 for
emotional distress and $20,000 for loss of reputation as a result
of the defamation. In addition, the jury awarded punitive
damages in the amount of $200,000 against Merculief and $400,000
against the Association.
The Association and Merculief filed a comprehensive
post-trial motion to set aside the verdict, strike components of
the economic damages award, order a new trial, or grant a
remittitur of the punitive damages awards. The trial court
denied the motion in its entirety. The Association and Merculief
appealed the jury's awards to this court.
III. DISCUSSION
A. Standard of Review
The Association argues that the superior court erred in
upholding the jury's award of economic damages, both because the
award lacked adequate evidentiary support and because the court
incorrectly applied the law. The determination of what law to
apply is a legal question for which we use our independent
judgment.1 The adequacy of evidence supporting the jury's award
is a mixed question of law and fact. As such, we review the
evidence presented in the light most favorable to Anderson and
evaluate de novo the legal question of whether that evidence is
specific enough to support the jury's economic damages award.2
The Association also argues that Anderson's improper
closing statement, the court's jury instructions on punitive
damages caps, and the excessive nature of the punitive damages
awards invalidate the jury's determination of punitive damages.
This court reviews de novo the propriety of a closing statement.3
We use our independent judgment to determine the legality of a
jury instruction.4 With regard to the excessiveness of punitive
damages, we have reviewed a lower court's decision on a motion
for remittitur or new trial for abuse of discretion.5 However,
in light of the United States Supreme Court's decision of Cooper
Industries, Inc. v. Leatherman Tool Group, Inc.,6 we will review
de novo the question of whether punitive damages are grossly
excessive and thus unconstitutional under the due process clause
of the Fourteenth Amendment.
B. The Superior Court Erred in Upholding the Jury's
Award of Economic Damages.
Anderson presented the jury with alternative theories
of wrongful termination: a claim of constructive retaliatory
discharge7 and a promissory estoppel claim.8 The jury found in
Anderson's favor on both claims. The Association's first point
on appeal is that the jury's award of $20,000 in lost back wages
and $217,000 in lost future wages cannot legally stand.
The Association argues that based on substantially
undisputed evidence, the contract contemplated by the parties was
a one-year contract, terminable without cause on fifteen days
notice, with a salary of $60,000-65,000 a year. At trial
Anderson accepted the lower salary figure as more probable, and
her economic expert used it in his damages calculations. Exc.
459 (Tr. 1692)] The Association argues that if the contract had
been signed and fully performed Anderson would have earned
$60,000 and that this, less the amount that Anderson could expect
to earn during one year of alternative employment, should reflect
the maximum measure of her lost earnings.9
Anderson responds that while she expected a one-year
contract, she also "reasonably expected to fulfill a long-term
need [the Association] had for economic development, regardless
of the form of a potential contract." She therefore argues that
the expected term of the contract should not limit her damages
for lost earnings.
We agree with the Association's position that under the
facts and circumstances of this case Anderson's lost earnings
should be measured by the amount and duration of the contract
that she expected to have with the Association. "The goal of
contract damages is to place the nonbreaching party in as good a
position as if the contract had been fully performed."10 Here
that goal is met by awarding to Anderson the year's salary she
expected from the Association, less the amount she could expect
to earn in alternative employment during that period. According
to Anderson's calculations her award for a one-year loss of
earnings should be approximately $13,000.11
Our precedent provides specific support for limiting
Anderson's economic damages to the terms of her expected
contract. In Skagway City School Board v. Davis we addressed the
question of whether a wrongfully discharged employee could
collect damages for injury to his reputation and impairment of
his future earning capacity.12 We stated:
The normal rule is that a wrongfully
discharged employee is entitled to the total
amount of the agreed upon salary for the
unexpired term of his employment, less what
he could earn by making diligent efforts to
obtain similar employment. Beyond this the
employee is not permitted recovery for injury
to his reputation.[13]
We explained that
[t]he primary reasons underlying [this] rule
are that (1) the computation of damages for
injury to reputation is unduly speculative,
and (2) such damage [to reputation and future
earning ability] cannot reasonably be
presumed to have been within the
contemplation of the parties when they
entered into the contract.[14]
The question of Anderson's economic damages is much
like the one presented in Skagway. In Skagway, the defending
school board had given the plaintiff a three-year contract to
serve as superintendent. After two years, performance-related
charges against the plaintiff led the school board to refuse to
renew his contract for a third year.15 Although the plaintiff's
expert witness testified that this discharge would prevent the
plaintiff from obtaining future employment as a school
administrator and that it would negatively impact his future
earning capacity,16 we limited the plaintiff's damages to those
flowing from the rest of his promised term of employment (another
year), minus what he was able to earn in mitigating damages
during that time.17
This court made a similar finding in the context of a
promissory estoppel claim in Alaska Democratic Party v. Rice.18
There, we upheld a jury's finding that a prospective employee who
was promised a two-year contract with the possibility of renewal
for an additional two years was entitled to only the promised two
years of salary, less what she was able to earn in alternative
employment during that period.19
In our view Skagway and Rice control the present case
and serve to limit Anderson's lost earnings damages.20
Anderson argues that three experts at trial adequately addressed
the issue of future damages. She notes that she called both a
vocational rehabilitation specialist/labor market analyst and an
economist as experts to evaluate her post-termination options.
However, those experts' use of Anderson's job at Bank of America
to offset some future damages was not only speculative, but
ignored reality. By the time of trial, Anderson no longer worked
at Bank of America and instead had returned to school to become a
barrister in Australia. Anderson's economist testified that her
future income was "very speculative" and that she might make more
money in her career as a barrister than she would have made if
she had stayed at the Association. In addition, Anderson's
rehabilitation counselor provided no factual data to substantiate
his hypothesis that Anderson would have a lifetime earning loss
in her new field despite the potential for higher annual
earnings. We recognize that cases may exist where the specific
term of an employment contract should not limit lost earnings
damages.21 But Anderson was to occupy a new position in a new
company created by a new government program, allocating shares in
a volatile industry. Thus this case presents no reason to
consider an exception to the rule expressed in Skagway that
damages for the breach of an employment contract are limited to
the unexpired term of the contract.
Anderson also argues that the one-year term of her
expected contract should not limit her lost earnings because she
could have sought lost earnings as a part of her successful
defamation claim. This argument fails. The jury made no award
for lost earnings based on Anderson's defamation claim, nor was
it asked to do so.
C. The Trial Court Properly Upheld the Jury's Finding
of Punitive Damages.
Due to Anderson's successful defamation claim against
the Association and Merculief, the jury awarded Anderson $15,000
for emotional distress, $20,000 for reputational harm, and
punitive damages totaling $400,000 against the Association and
$200,000 against Merculief. The Association and Merculief argue
that because of improprieties in Anderson's closing statement,
the trial court's instruction of the jury on punitive damages
caps, and the "excessive" nature of the punitive awards, this
court should vacate the jury's punitive damages awards and order
a new trial on that issue. We disagree and affirm the jury's
awards of punitive damages.
1. Anderson's discussion of corruption in
closing argument was not improperly prejudicial.
The Association and Merculief contend that Anderson's
focus in closing argument on punishing the company's corruption
was improper and that her closing should have instead focused on
punishing the defamatory statements that harmed Anderson.22 We
disagree with appellants' assertion that Anderson's closing
statement was improper in this regard.
The jury in this case could have found that the motive
behind the Association's and Merculief's defamatory statements
was that of covering up corruption. We agree with Anderson's
argument that the Association and Merculief had a large financial
stake in hiding any misconduct. Had the state found reason to
investigate financial misappropriations occurring within the
Association, the company could have lost its "highly lucrative
CDQ allocation." Indeed, Merculief made a defamatory statement
to Glenn Haight, CDQ manager for the state. Haight testified in
deposition that Merculief's allegations that Anderson had falsely
accused him and that she had personally and professionally
threatened other colleagues led him to conclude that the state
should take a "hands off" approach and not investigate. Thus
there was evidence that Merculief and the Association used
defamation to hide their misconduct and to safeguard their
reputations and their CDQ allocation. The existence of
corruption within the Association was therefore an important part
of Anderson's theory of defamation, and Anderson's counsel
appropriately addressed it in closing argument.
2. The trial court's instruction on
statutory damages caps was harmless error.
Because the defamatory conduct at issue here took place
in 1998, the jury's award of punitive damages is governed by AS
09.17.020. This statute limits punitive damages awards to the
greater of three times compensatory damages or $500,000.
Subsection (g) of the statute allows an increased award of up to
$7,000,000 if "the fact finder determines that the conduct proven
was motivated by financial gain and the adverse consequences of
the conduct were actually known by the defendant or the person
responsible for making policy decisions on behalf of the
defendant." The statute is silent as to whether the court should
inform the jury of the statutory caps or the legal significance
of their findings as to motivation.
Here, over the Association's and Merculief's objection,
the trial court instructed the jury that they could award a
maximum of $500,000 in punitive damages, unless they answered
"yes" to special verdict form questions 1 and 2 - asking
separately whether each defendant was motivated by financial gain
and knew the adverse consequences of its conduct - in which case
the jury could award up to $7,000,000 in punitive damages. The
jury answered "yes" to both questions 1 and 2 of the special
verdict form, and awarded punitive damages of $400,000 against
the Association and $200,000 against Merculief. The Association
and Merculief argue that, by informing jurors of AS 09.17.020's
damages cap provisions, the trial court infringed on their
constitutional right to a jury trial on punitive damages.
The Association and Merculief assert that article I,
section 16 of the Alaska Constitution guarantees them the right
to a jury trial to the extent that that right existed at common
law, and that the trial court, by informing the jury of the
applicable damages caps, interfered with the jury's ability to
independently calculate, and ultimately to decide, that issue.
They support their position by citing to a number of state court
decisions that have found compensatory damages caps
unconstitutional under their state constitutions.23 Other states
that have found caps constitutional have done so based on an
assumption that the caps will be employed by the trial judge
after the jury calculates its award of damages independent of the
caps.24
Subsequent to the briefing in this case we resolved the
question of whether the punitive damages caps of AS 09.17.020 are
constitutional. In Evans v. State we held that the punitive
damages caps are constitutional and do not infringe on the right
to trial by jury.25 That holding controls here. But Evans did
not resolve the question whether it is appropriate - or
constitutional - to instruct a jury as to the existence and the
amount of the caps. We proceed to address that question.
The trial court here responded to appellants' objection
to the cap instruction by giving the following instruction:
In giving these instructions to guide
you on how punitive damages are to be
determined, the court does not intend to
express any opinion as to how much money for
punitive damages you should award. You may
not assume that because the court identifies
ranges of damages or explains how to measure
the damages that you are required to make an
award of a particular amount of punitive
damages. The amount of punitive damages to
award is entirely within the purview of you,
the jury.
As Anderson correctly notes, we "presume that a jury follows the
trial court's instructions."26 Anderson contends that because the
trial court instructed the jury not to use the caps as a gauge
for an appropriate award, we should assume that the jury
refrained from doing so.
We agree with the appellants that instructing the jury
on the punitive damages caps was error. Putting the caps before
the jury carried a substantial risk of suggesting the range of
appropriate punitive awards.27 Moreover, no countervailing
benefit could be gained from the instruction.28
However, we find that under the circumstances of this
case the error does not warrant reversal. Three factors lead to
this conclusion. First, this is an issue of first impression in
Alaska, and no clear guidance has been available on the issue.
Second, the instruction quoted above warned the jury against
drawing suggestive inferences from the caps and we normally
presume that a jury follows such instructions.29 And third, the
fact that the jury awarded punitive damages totaling $400,000
against the Association and $200,000 against Merculief - when
their findings as to financial motivation and actual knowledge
entitled them to award up to $7,000,000 against each - indicates
that the jury did not improperly adjust its award of punitive
damages based on the caps instruction.
3. The trial court did not err in refusing to
remit the jury's punitive damages awards for
excessiveness.
The trial court instructed the jury to consider the
statutory factors set forth in AS 09.17.020(c) in its calculation
of punitive damages. Alaska Statute 09.17.020(c) provides that
in determining punitive damages, a fact finder may consider:
(1) the likelihood at the time of the
conduct that serious harm would arise from
the defendant's conduct;
(2) the degree of the defendant's
awareness of the likelihood described in (1)
of this subsection;
(3) the amount of financial gain the
defendant gained or expected to gain as a
result of the defendant's conduct;
(4) the duration of the conduct and any
intentional concealment of the conduct;
(5) the attitude and conduct of the
defendant upon discovery of the conduct;
(6) the financial condition of the
defendant; and
(7) the total deterrence of other
damages and punishment imposed on the
defendant as a result of the conduct,
including compensatory and punitive damages
awards to persons in situations similar to
those of the plaintiff and the severity of
the criminal penalties to which the defendant
has been or may be subjected.
The Association and Merculief argue that neither these statutory
factors nor common law factors support the jury's punitive
damages awards in this case. We disagree and find that under the
circumstances of this case, the punitive damages awards upheld by
the trial court were not excessive.
a. The Association and Merculief
were aware of the high likelihood that their
conduct would cause Anderson serious harm.
With respect to the first and second statutory factors,
we believe that a jury could reasonably find that the
Association's and Merculief's defamation of Anderson were likely
to, and did, cause Anderson serious harm, and that the
Association and Merculief must have been aware of this harm.
Appellants attempt to minimize the harm suffered by
Anderson,30 while ignoring her severe career and reputational
losses. After Anderson reported Merculief's misdealings,
Merculief and the Association board spread vicious lies about
Anderson, accusing her of stalking Merculief and of personally
and professionally threatening colleagues. The evidence supports
the conclusion that the appellants made these statements
deliberately, in order to "get rid of" Anderson, destroy her
credibility, and hide the extent of ongoing financial
misappropriations within the company. In addition, the jury
found that the Association and Merculief both acted with
financial motives and actual knowledge of the harm that their
actions would cause.31 Whether or not Anderson is able to recoup
her financial losses in her new career as a barrister, the
Association and Merculief effectively shut her out of the career
and field that she had chosen. The trial court was within its
discretion to consider this a serious and deliberate harm.
b. Appellants' conduct was
motivated by substantial financial gain.
With respect to the third statutory factor, evidence
demonstrating that the Association and Merculief expected their
behavior to result in financial gain, or at least avoidance of
substantial financial loss, supports the jury's finding as to the
appellants' motive. Haight, the state director of the CDQ
program, testified that Merculief's statements to him about
Anderson, her past, and her "false allegations" convinced him not
to investigate the allegations of corruption in the Association.
Had the state investigated, the Association could have lost its
percentage of the CDQ allocation. According to Anderson:
At $228,000 per percentage point of
allocation, [the Association] stood to lose a
considerable sum if its allocation were
reduced. Direct benefits to [the
Association's] board members in the form of
loans and grants were in the hundreds of
thousands of dollars, and administrative, per
diem, and travel expenses were substantially
in excess of guidelines used for non-profit
grants by the state and federal government
for an entity of its size. Were the
financial misconduct and self-dealing of its
board members revealed through Anderson's
actions, [the Association] would have been
subjected to stricter scrutiny from both
state and federal agencies, and the board
members stood to lose the lucrative benefits
they were providing to themselves.
We conclude that there was more than enough evidence here to
support the jury's finding of a financial motive.
c. The Association's and
Merculief's behavior upon discovery of their
conduct warrants a large punitive damages
award.
As to the fourth and fifth factors, while the short
duration of the appellants' conduct does not weigh in favor of
great punitive damages, their attitude and conduct toward
Anderson upon her report of their misconduct does. Merculief's
response to Anderson's concerns about his misconduct was to deny
the misconduct or to blame Anderson for his own
misappropriations. In addition, there is evidence that after it
became apparent that Merculief had misappropriated money from the
Association, he resisted attempts to collect past overpayments
made to him and continued to engage in financial improprieties.
Merculief eventually resigned from his presidency after repeated
pressure to halt his misappropriations.
The board, meanwhile, seemed to do its best to avoid
dealing with Anderson's concerns about Merculief. When the board
did commission an audit to investigate, it designed the audit to
be as narrow as possible and failed to address broader issues of
potential financial misdealing identified by Anderson as areas of
concern. Further, the evidence indicates that the board's
behavior toward Anderson did not change after it discovered that
Anderson's concerns about Merculief were well-founded. Even
during trial, a board member continued to blame her for being
disloyal and falsely accusing Merculief. This board member
continued to assert that Merculief had done nothing wrong.
Although the board did attempt to collect from Merculief the
amounts that he had misappropriated, it did not follow through
with these attempts. In fact, it voted to indemnify Merculief
for the punitive damages awarded against him. These behaviors
indicate an individual and an organization unwilling to admit the
misconduct they engaged in or the harm they inflicted upon their
employee.
d. The Association's and
Merculief's financial conditions do not call
for a reduction of the punitive damages.
As to the sixth statutory factor, consideration of
appellants' financial condition need not reduce the jury's
punitive damages awards. While the ratio of punitive damages
awarded against Merculief individually - $200,000 - to
Merculief's annual salary at the time - $70,000 - may be high in
relation to ratios found in previous cases,32 the jury here knew
that the board had voted to indemnify Merculief for any punitive
damages assessed against him. The jury's award, then, would have
no impact on Merculief's finances.
As for the Association, the company is a nonprofit
organization and thus earns no profits; however, the Association
conceded that its unrestricted assets are an appropriate measure
of its wealth. The Association's unrestricted assets in 1999
totaled $4.5 million. The company argues that not all of its
unrestricted assets were truly uncommitted at the time of trial
and that the court ought to use its actually unrestricted assets
of approximately $1.5 million in assessing punitive damages;
however, using the stated $4.5 million figure seems at least
equally appropriate. Comparing the jury's $400,000 punitive
damages award against the Association with the company's stated
unrestricted assets at the time of trial, we find that the award
was only 8.9% of the Association's unrestricted assets. We have
previously upheld punitive damages awards that constituted a
greater percentage of a defendant's assets.33 Thus, the jury's
awards here were not excessive on grounds of appellants'
financial condition.
e. Considerations of deterrence,
past punitive awards, and common law factors
support the jury's awards of punitive
damages.
Finally, the seventh statutory factor, examining "the
total deterrence of other damages and punishment imposed on the
defendant . . . including compensatory and punitive damages
awards to persons in situations similar to those of the
plaintiff,"34 encompasses the appellants' concern for common law
factors in assessing punitive damages. In comparing this jury
award to those of past cases, the Association and Merculief treat
the two punitive damages awards here as one award of $600,000
against the Association and point out that this court has only
once allowed a punitive damages award larger than $600,000.35 We
note, however, that this does not mean that the jury's award here
was excessive. Indeed, if we examine the awards as they were
made - one award of $400,000 and one of $200,000 - we see that
case law supports awards of this magnitude.36
The Association and Merculief also argue that we should
look for guidance to the United States Supreme Court's three
guideposts for determining whether punitive damages awards are
excessive: (1) the egregiousness of the conduct at issue, (2)
the relation between the actual damages and the punitive award,
and (3) whether the defendant received fair notice from statutes
or previous cases that it could be subject to a punitive award of
the magnitude in issue.37 We agree and proceed to do so.38
First, as discussed above, the appellants' deliberate
use of defamatory statements to "get rid of" Anderson and to push
her out of her chosen career and industry reasonably constituted
egregious misconduct.
Next, although AS 09.17.020 creates a normal ratio of 3-
to-1 for the relationship between punitive and compensatory
damages awards, this court has never enforced a specific ratio
with regard to such awards. The statute itself clearly allows
awards departing from the 3-to-1 ratio.39 Moreover, this court
has upheld several punitive damages awards where the ratio of
punitive to compensatory damages was greater than 3-to-1. In
Pluid v. B.K., we upheld a punitive to compensatory ratio of 5-to-
1.40 In Era Aviation, Inc. v. Lindfors, we allowed a ratio of 10-
to-1.41 We upheld a 48.3-to-1 ratio in Norcon v. Kotowski.42 As
we noted in Cameron v. Beard, "[t]his court has refused to
prescribe a definite ratio between compensatory and punitive
damages. Though comparing punitive and actual damage awards is
one way to determine if punitive damages are excessive, other
factors . . . are equally important to the determination."43
Here, the jury awarded compensatory damages totaling $35,000 on
Anderson's defamation claim and Anderson will be entitled to
approximately $13,000 for lost wages. The jury's punitive awards
of $400,000 and $200,000 result in ratios of 8.33-to-1 and 4.16-
to-1 respectively. Given the Association's and Merculief's
conduct and motives in this case, we find that those ratios are
not excessive.
Finally, as to the United States Supreme Court's last
criterion, the Association and Merculief did have notice that
they could be subject to punitive damages awards of the magnitude
here. We have upheld awards of this magnitude and greater in the
past.44 Further, AS 09.17.020 imparts notice that punitive
damages may be awarded for malicious acts and that awards of up
to $7,000,000 may be permitted where the acts are motivated by
financial gain and committed with knowledge of their
consequences.
Thus, while the jury's awards of punitive damages
against the Association and Merculief are relatively high, they
are not beyond sustainable limits according to statute, common
law, or constitutional standards. Viewed deferentially or de
novo, we conclude that the trial court did not err in upholding
the jury's determination of punitive damages.
IV. CONCLUSION
Based on the foregoing reasons, we order that the award
of lost earnings be reduced in accordance with this opinion, and
we affirm the punitive damages awards.
REVERSED in part and AFFIRMED in part.
_______________________________
1See Bandow v. Bandow, 794 P.2d 1346, 1347 n.3 (Alaska 1990).
2See Alaska Tae Woong Venture, Inc. v. Westward Seafoods, Inc.,
963 P.2d 1055, 1061-62 (Alaska 1998); Ben Lomond, Inc. v.
Schwartz, 915 P.2d 632, 636-37 (Alaska 1996).
3See State v. Gilbert, 925 P.2d 1324, 1326-27 (Alaska 1996).
4See Stinson v. Holder, 996 P.2d 1238, 1244 (Alaska 2000);
Chenega Corp. v. Exxon Corp., 991 P.2d 769, 775 (Alaska 1999).
5See Era Aviation, Inc. v. Lindfors, 17 P.3d 40, 48 n.40 (Alaska
2000); IBEW, Local 1547 v. Alaska Util. Constr., Inc., 976 P.2d
852, 855 (Alaska 1999).
6532 U.S. 424 (2001).
7The superior court instructed the jury that the elements of the
constructive retaliatory discharge claim were that the
Association made Anderson's working conditions intolerable
because of her reports that Merculief was misusing corporate
assets and that the conditions were so intolerable that a
reasonable person in her position would have felt compelled to
resign.
8The court instructed upon the following elements as to
Anderson's promissory estoppel claim:
1. The defendant made a promise to the
plaintiff;
2. The defendant expected or reasonably
should have expected that the promise would
cause plaintiff to act;
3. In reliance on the defendant's
promise, the plaintiff acted, thereby
substantially changing her position; and
4. Justice requires enforcement of the
defendant's promise.
The special verdict form reduced the inquiry to two questions:
"Did [the Association] promise Susan Anderson a contract of
employment?" and "Did [the Association] break its promise to
provide Susan Anderson a contract of employment?"
9The Association raised these contentions in a mid-trial motion
for partial directed verdict, in proposed jury instructions, and
in a renewed motion for directed verdict made at the end of the
trial.
10Luedtke v. Nabors Alaska Drilling, Inc., 834 P.2d 1220, 1226
(Alaska 1992) (citation omitted).
11Anderson based her calculations on an annual salary of $60,000
with the Association and an annual salary of $45,000 with Bank of
America. She adjusted the figures for a seven percent net Social
Security tax and found that one year's lost wages were equal to
$13,115.
12543 P.2d 218, 224-28 (Alaska 1975), overruled on other grounds
by Diedrich v. City of Ketchikan, 805 P.2d 362 (Alaska 1991).
13Id. at 225 (citing 5 Arthur L. Corbin, Corbin on Contracts
1095 (1964)).
14Id.
15Id. at 225-
168.
17Id. at 225-28.
18934 P.2d 1313 (Alaska 1997).
19Id. at 1320-21.
20Future economic damages are barred, not only by the clearly
implied contract terms in this case, but also by Anderson's
failure to offer evidence sufficient to accurately calculate
future damages. This court has found that "[a]n award cannot
stand . . . if the amount is the result of speculation," and that
"a plaintiff alleging breach of contract must present evidence
sufficient to calculate the amount of the loss caused by the
breach." City of Whittier v. Whittier Fuel & Marine Corp., 577
P.2d 216, 222 (Alaska 1978); Ben Lomond, Inc. v. Schwartz, 915
P.2d 632, 636 (Alaska 1996) (citing City of Palmer v. Anderson,
603 P.2d 495, 500 (Alaska 1979)). See also 48 Am. Jur. 2d, Proof
of Facts 18 (2001) ("Furthermore, damages for future losses
must be reasonably certain of calculation and cannot be based
upon speculation or conjecture.").
21See, e.g., Allen v. Cornish & Carey, 1997 WL 195433, at *6-*7
(N.D. Cal., Apr. 11, 1997) (lost future earnings under specified
term contract not limited to term where there had been a long
series of such contracts).
22The Association and Merculief also contend that Anderson's
closing argument was prejudicial because Anderson's counsel
exhorted the jurors to "do their job" and asked them to consider
broad societal issues outside the scope of the evidence.
However, appellants failed to object at trial to Anderson's
closing on this ground; thus, they failed to preserve their right
to object on that ground here. We consider their argument
waived. See Jenkins v. Handel, 10 P.3d 586, 592 (Alaska 2000).
23See, e.g., Moore v. Mobile Infirmary Ass'n, 592 So. 2d 156, 159-
62 (Ala. 1991), reh'g denied, ( Jan. 3, 1992); Best v. Taylor
Mach. Works, 689 N.E.2d 1057, 1076 (Ill. 1997); Morris v. Savoy,
576 N.E.2d 765, 770-71 (Ohio 1991); Lakin v. Senco Prods., Inc.,
987 P.2d 463, 467-75 (Or. 1999); Sofie v. Fibreboard Corp., 771
P.2d 711, 720-23 (Wash. 1989), reconsideration denied, (Sept. 27,
1989).
24See, e.g., Boyd v. Bulala, 877 F.2d 1191, 1195-96 (4th Cir.
1989); Kirkland v. Blaine County Med. Ctr., 4 P.3d 1115, 1120
(Idaho 2000); Murphy v. Edmonds, 601 A.2d 102, 116-18 (Md. 1992);
Adams v. Children's Mercy Hosp., 832 S.W.2d 898, 907 (Mo. 1992)
(en banc); Wright v. Colleton County Sch. Dist., 391 S.E.2d 564,
569-70 (S.C. 1990); Etheridge v. Med. Ctr. Hosps., 376 S.E.2d
525, 528-29 (Va. 1989).
25___ P.3d ___, Op. No. 5618 (Alaska, August 30, 2002).
26Knix v. State, 922 P.2d 913, 923 (Alaska App. 1996).
27See Michael S. Kang, Don't Tell Juries About Statutory Damage
Caps: The Merits of Nondisclosure, 66 U. Chi. L. Rev. 469, 483-
86 (1999) (Effect of statutory cap is that "juries might `anchor'
their deliberations to that amount . . . . [J]uries that know
about a limit on damages tend to make awards that are
significantly closer to that figure than juries that do not know
about the limit. . . . [Another] effect of disclosure of
statutory caps is the scaling effect. Research suggests that
people tend to use the range of proffered response alternatives
as a frame of reference for estimation tasks.").
28We see no need, however, to cloak this type of error in
constitutional terms.
29See Knix, 922 P.2d at 923; cf. Simms v. State, 464 P.2d 527, 527-
28 (Alaska 1970). But see Kang, supra note 27.
30Appellants cite the following cases involving what they believe
to be more serious harm than is present here: IBEW, Local 1547
v. Alaska Util. Constr., Inc., 976 P.2d 852, 858-59 (Alaska 1999)
(defendant repeatedly threatened and intimidated plaintiff, but
punitive damages remitted to $212,500); Norcon, Inc. v. Kotowski,
971 P.2d 158, 163, 174-77 (Alaska 1999) (defendant sexually
harassed plaintiff, who became so scared she slept in a car, but
punitive damages limited to $500,000); Sturm, Ruger & Co. v. Day,
594 P.2d 38, 41, 48-49 (Alaska 1979), modified, 615 P.2d 621, 624
(Alaska 1980) (defendant seriously physically injured plaintiff,
but punitive damages limited to $500,000), partially overruled on
other grounds by Dura Corp. v. Harned, 703 P.2d 396, 405 n.5
(Alaska 1985).
31We generally give deference to the jury's findings of fact. See
Borchgrevink v. Borchgrevink, 941 P.2d 132, 142-43 (Alaska 1997).
32Appellants cite Norcon, 971 P.2d at 174-76 (ordering remittitur
where jury award equaled three years of defendant's income).
33See, e.g., IBEW, Local 1547, 976 P.2d at 859 (affirming
remittitur where award equaled 25% of defendant's net worth and
upholding reduced award equal to 12.5% of defendant's net worth).
34AS 09.17.020(c)(7).
35 See Alaska Ins. Co. v. Movin' On Constr., Inc., 718 P.2d 472,
475 (Alaska 1986) (adjusting punitive damage award to $690,652.50
after reducing compensatory damages to sustainable amount of
$230,217.50 to carry out jury's desire to award three times
compensatory damages).
36See, e.g., Norcon, 971 P.2d at 174-77 (upholding punitive
damages of $500,000); Sturm, Ruger & Co., 594 P.2d at 48-49,
modified, 615 P.2d at 624 (upholding punitive damages of
$500,000), partially overruled on other grounds by Dura Corp.,
703 P.2d at 405 n.5.
37See BMW of N. America, Inc. v. Gore, 517 U.S. 559, 574-75
(1996).
38As noted above, under Cooper Industries, Inc. v. Leatherman Tool
Group, Inc., we review de novo the question whether punitive
damages are grossly excessive and thus unconstitutional under the
due process clause of the Fourteenth Amendment. 532 U.S. 424,
435 (2001) ("the question whether a fine is constitutionally
excessive calls for the application of a constitutional standard
to the facts of a particular case, and in this context de novo
review of that question is appropriate") (citations omitted). In
Cooper, the United States Supreme Court discussed the elements of
the relevant constitutional inquiry:
[C]onstitutional violations [due to excessive
fines] [are] predicated on judicial
determinations that the punishments [are]
grossly disproportional to the gravity of
defendants' offenses. We have recognized
that the relevant constitutional line is
inherently imprecise, rather than one marked
by a simple mathematical formula. But in
deciding whether that line was been crossed,
we have focused on the same general criteria:
the degree of the defendant's
reprehensibility or culpability; the
relationship between the penalty and the harm
to the victim caused by the defendant's
actions; and the sanctions imposed in other
cases for comparable misconduct.
Cooper, 532 U.S. at 434-35 (citations and quotations marks
omitted).
39Subsection (f) limits punitive damages to the greater of
$500,000 or an amount three times the compensatory award. And
subsection (g) provides an even greater cap - $7,000,000 - for
cases such as this one, where the jury found a motive of
financial gain and actual knowledge of the consequences of the
appellants' conduct. AS 09.17.020(f), (g).
40948 P.2d 981, 984-85 (Alaska 1997).
4117 P.3d 40, 43, 49 (Alaska 2000).
42971 P.2d 158, 161, 177 (Alaska 1999).
43864 P.2d 538, 551 (Alaska 1993) (internal citations omitted).
44See supra notes 35 and 36.