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Central Bering Sea Fishermen's Assoc. v. Anderson (9/6/2002) sp-5623
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]
