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Anchorage Police & Fire Retirement System v. Gallion (3/14/2003) sp-5672
Anchorage Police & Fire Retirement System v. Gallion (3/14/2003) sp-5672
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
ANCHORAGE POLICE & FIRE )
RETIREMENT SYSTEM, ) Supreme Court No. S-9880
)
Appellant, ) Superior Court No. 3AN-98-
4563 CI
)
v. ) O P I N I O N
)
JACK GALLION, MICHAEL ) [No. 5672 - March 14, 2003]
CROTTY, JOHN YOUNG, )
CARROLL GRANT, ANTHONY )
PROVOST, DOUGLAS K. BOHAC, )
and ANCHORAGE POLICE AND )
FIRE RETIREES ASSOCIATION, )
)
Appellees. )
________________________________)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, John Reese, Judge.
Appearances: Douglas J. Serdahely and David
J. Mayberry, Patton Boggs LLP, Anchorage, for
Appellant. Peter J. Maassen, Ingaldson
Maassen, P.C., and Peter Gruenstein,
Gruenstein & Hickey, Anchorage, for
Appellees.
Before: Matthews, Eastaugh, Bryner, and
Carpeneti, Justices. [Fabe, Chief Justice,
not participating.]
EASTAUGH, Justice.
I. INTRODUCTION
The superior court held the Board of Trustees of the
Anchorage Police & Fire Retirement System in indirect criminal
contempt for violating a court order that approved a class action
settlement. Indirect criminal contempt requires finding beyond a
reasonable doubt that the respondent violated an order willfully.
Because the superior court found that the system willfully
violated the court's order, because we conclude that the evidence
supports that finding and that the order was unambiguous, and
because we also conclude that there is no indication the superior
court applied the wrong standard of proof, we affirm.
II. FACTS AND PROCEEDINGS
The Anchorage Police & Fire Retirement System (APFRS,
or system) from 1994 to 1997 consisted of three benefit plans
(Plans I, II, and III) that provided retirement, disability, and
death benefits for Municipality of Anchorage police officers and
fire fighters. At pertinent times the board of trustees
administering the APFRS consisted of eight members.1 The
Anchorage mayor appointed the board's eight members; four were
chosen from the mayor's administration and four were chosen from
a list of persons nominated by the APFRS membership.2
As of 1994 Plan I was 135% funded, Plan II was 112%
funded, and Plan III was 89% funded; thus, Plans I and II were
over-funded, Plan III was under-funded, and the three plans were
over-funded in the aggregate.3(Alaska 1997), describes these
circumstances in detail. In 1994 the Anchorage Assembly passed
Anchorage Ordinance 94-95, combining the plans and requiring that
the assets of Plans I and II fund Plan III.4 APFRS members sued,
challenging the constitutionality of the ordinance.5 We held in
Gallion v. Municipality of Anchorage (Gallion I) that the assets
of the three plans could not be combined to fund all three plans
to the detriment of the members of Plans I and II, and that the
surpluses of each of those plans had to be used for the sole
benefit of its members.6
Following our remand, APFRS members filed a second
class action (Gallion II) in which they claimed that the APFRS
board had not used the funds' surpluses for the benefit of the
members in compliance with our decision in Gallion I. The
members, represented by class counsel, sought to recover some of
the monies by "either reduc[ing] contributions, increas[ing]
benefits, or both." In March 2000 the class, the board, and the
Municipality of Anchorage entered into a Conditional Settlement
Agreement (CSA, or agreement) to settle Gallion I, Gallion II,
and two other lawsuits.7 Among other things, the CSA provided for
distributing funds from the three plans to their respective
members, provided for a one-time reversion of $40 million to the
municipality, and provided for attorney's fees for class counsel.
Superior Court Judge John Reese conducted a hearing on
March 17, 2000, approved the proposed CSA, and approved an award
of attorney's fees to class counsel. The court observed that
some class members had filed objections, some of which harshly
criticized class counsel, to the proposed award of fees to class
counsel. The court's oral comments explained at length the
court's reasoning in rejecting those objections and in
calculating the amount of its fee award to class counsel. The
superior court entered a written order on April 6, 2000 awarding
attorney's fees to class counsel. The April 6 order also ordered
APFRS, when it distributed the funds to the members per the CSA,
to send each member a copy of the court's written findings along
with a copy of the transcript of the court's oral order. This
requirement was intended to educate the members about the court's
reasons for the fee award and was apparently intended to respond
to members' criticism of class counsel. Thus, the April 6 order
awarding attorney's fees provided:
[S]o that the APFRS members may fully
understand the basis for the court's order
with respect to attorneys' services and fees,
it is further ORDERED that the APFRS shall
mail at the expense of the common fund to
each of the APFRS members a copy of these
findings along with a copy of the transcript
of the court's oral order no later than the
date enhancements are distributed to
retirees.
(Emphasis added.) The April 6 order therefore contemplated
sending out copies of the transcript and findings at the same
time, and no later than the time the system distributed the
settlement payments to each APFRS member.
Several weeks later, the board filed a motion for
clarification and interpretation of the CSA due to the board's
professed concern about difficulties in making timely
distributions.8 In response, the superior court issued a written
order on April 28 that stated: "1. When sufficient funds have
been made available through liquidation of investments to make
all payments, all payments will be made. 2. Neither the
Municipality nor the attorneys, nor the members, get paid before
anyone else." The order also required that "5. The
`educational' requirements of the settlement will be accomplished
within the time allowed by the liquidation schedule.
Distribution will not be delayed to accomplish education."
The system transferred money to class counsel, the
municipality, and some class members on May 18, 2000. But there
was a delay of about three weeks before the system distributed
the court's findings regarding attorney's fees. The system
first sent the transcript to members as an enclosure with a
letter from the APFRS board dated June 8.9 On June 9 the system
filed a document entitled Notice of Compliance with Court Order;
the notice stated that the required mail-out was completed June
7.
On June 21 class counsel moved for an order to show
cause and for Rule 95 penalties; the motion asked court to
sanction the board or its attorneys under Alaska Civil Rule 90(b)
or Alaska Civil Rule 95. Following briefing, the court ordered
the system and its counsel to appear and show cause why they
should not be sanctioned "for violating the court's order
concerning the timing of notification of the class members of the
attorney fee dispute resolution."
After conducting an evidentiary hearing, the superior
court found that "the distributions were made before the June 8th
notice [enclosing the transcript] was sent." "[D]istributions
were to the attorneys, the Municipality and 149 of the members .
. . . I do find that that is contrary to the specific and
unambiguous language of the April 6th order, so the system did
violate that order, and in doing so defeated the purpose of that
clause of the order." The court then held the system in contempt
and announced an intention to fine it $100.10 Counsel for the
system argued that contempt required a willful violation of the
order and that the evidence demonstrated that Charles Laird, who
had acted for the board, "did not intentionally defy the court's
order" and had an honest and good faith belief as to what he was
required to do. The court nonetheless held the system in
contempt. We discuss the court's comments in Part III.B of this
opinion.
The court also found the system's attorney, Robert
Klausner, in contempt and assessed, but suspended, a "nominal
penalty" of $10 against him.
The APFRS appeals from the order holding the system in
contempt. Klausner has not appealed.
III. DISCUSSION
A. Standard of Review
We review de novo a legal determination of what
elements are necessary to prove indirect criminal contempt.11
Relying by analogy on the standard of review applicable in
deciding whether a court has made findings on each necessary
element of a statutory violation,12 we will review de novo
contempt citations imposed under Alaska Civil Rule 90(b).13 We
exercise our independent judgment in deciding whether a court has
made factual findings satisfying each element necessary for
indirect contempt. We review for clear error factual findings a
court makes in deciding whether to hold a respondent in contempt.14
B. The Superior Court Found the Necessary Element of
Willfulness When It Held the System in Indirect
Criminal Contempt of Court.
The superior court held the system in contempt for
disobeying the April 6 order.15 This contempt was criminal
because the sanction served a punitive, as opposed to a coercive,
function.16 The contempt was indirect because the court did not
witness or hear the conduct constituting the contempt.17
The system argues that the superior court misdefined
and misapplied the elements of indirect criminal contempt,
because it omitted the requirement that the violation be willful.18
The system also suggests that the court failed to find a willful
violation.
We described in Taylor v. District Court for the Fourth
Judicial District the inquiry a court must make concerning the
element of willfulness in determining whether an indirect
contempt has occurred.19 There we said:
In order for there to be contempt it must
appear that there has been a willful
disregard or disobedience of the authority or
orders of the court. Whether such
willfulness exists is something the court
cannot be aware of from its own observations
in the courtroom and without inquiry from
other sources. Without such inquiry the
court cannot ascertain the operational facts
from which an inference of willful
disobedience or disregard of the court's
authority or orders can be drawn.[20]
In this case, the system's alleged noncompliance with
the court's orders was not observed by the superior court;
rather, it was brought to the court's attention by class
counsel's motion for an order to show cause.21
In Taylor we stated that willfulness is the mens rea
requirement for criminal contempt. "When a criminal contempt is
involved, all elements of the offense, including that of
willfulness, must be proven beyond a reasonable doubt."22
"Willfulness is established by proof of conscious action and does
not require a showing of specific intent."23 We said in
Continental Insurance Cos. v. Bayless & Roberts that "[i]f it is
proved that a party had notice of the court's order and was aware
of the requirements but failed to comply with the order, in the
absence of explanation of the reason for such failure, a court
could infer it to be intentional."24 But we held in Bayless &
Roberts that "[n]o findings of fact were made as to Continental's
intent in disobeying the court's order."25
During the show cause hearing the superior court heard
testimony from Charles Laird, the APFRS director and the
administrator charged with implementing the court's orders.
Laird explained how he, the APFRS lawyer, and the staff
interpreted the orders, and discussed why he believed the system
was in compliance. Laird explained the lengthy process of
distributing the funds. He described sending out inquiries to
the APFRS members to determine in which form each wished to
receive payment, receiving the responses, and issuing the
checks. He explained that this process could not be done in one
day. He therefore did not interpret the April 6 order to mean
that the letters transmitting the court's findings had to be sent
on the first day any checks went out. The order referred to "the
date enhancements are distributed to retirees." Laird testified
that the process did not take place on just one day. Instead, he
understood the order's reference to "the date enhancements are
distributed to retirees" to refer to the span of time, as
described in the CSA, in which the system was compelled to
complete the process - by late spring or early summer of 2000.
He testified that he believed he was complying with the court's
orders by sending the letters on June 8 - before the process was
completed - as opposed to sending the letters simultaneously with
the payments. This was the only testimony the court heard
regarding the system's alleged contempt. But there was other
evidence before the court. This evidence included the April 6
order itself, the court file containing memoranda about how that
order was to be interpreted and applied, the clarifying April 28
order, the text of the board's June 8 letter to the class
members, and copies of May and June correspondence between
counsel concerning what the system needed to do and when it
needed to do it to comply with the April 6 order.
After receiving the Laird testimony, the court
announced that it was holding the system in contempt. Counsel
for the system asked the court to clarify its findings on the
issue of willfulness. Earlier in the hearing, the court had
articulated its understanding of the elements of contempt,
stating, "There has to be a court order, and they have to have
notice of the court order, and they have to have violated a court
order, and they have to have been in a position to have not
violated it." In response to counsel's inquiry about the issue
of willfulness, the court stated:
I do not find that Mr. Laird is being
dishonest. . . . But the fact is the board
did something contrary to the specific terms
of my order. Mr. Laird is not the one that's
on the hot seat here today. It's the system
that violated my order. . . . I find that
the board, I don't know if it was Mr. Laird,
I don't know if it was some particular member
of the board, it might have been Mr.
[Klausner], it might have been somebody from
the Municipality, it might have been the man
in the moon. I don't know who it was, but
somebody influenced the board and caused the
board to make a decision in sending out the
contradiction of my findings at the same time
as the findings after they were supposed to
have sent them out, with the particular
intent of defying my order and interfering
with the impact of my order, and they are in
contempt for doing that. . . . They've acted
like the thugs we put in the jury box every
day handcuffed together, saying we don't
respect the law, they don't respect the
court. That's contempt. They ought to be
ashamed of themselves. I'm very sorry they
did this in the first place, and I'm really
sorry that they didn't come in here today and
say we got carried away by emotional stuff .
. . and we're sorry we got caught up in that.
We don't mean the court any disrespect. But
they didn't come in here and say that, so
they're in contempt.[26]
(Emphasis added.)
The system's attorney then argued that the system,
acting through Laird, "did not intentionally defy the court's
order." The court responded, "I find to the contrary . . . ."
The court later observed, in discussing Klausner's role, that
"his client's purpose as I mentioned before seems culpable in
that it seems tied in with an intent to interfere with and negate
the rulings [of] the court."
Thus, the court first found that the system had decided
to send out the letter contradicting the court's findings, "after
they were supposed to have sent them out, with the particular
intent of defying my order and interfering with the impact of my
order. . . ." Second, by announcing that "I find to the
contrary," the court expressly rejected the system's assertion
that the system did not intentionally defy the order. These
findings satisfy the requirement of a willful violation. We
therefore reject the system's argument that the court misdefined
the elements of contempt and failed to find a willful violation.
It does not matter that the court, when it first
discussed the contempt sanction, did not specifically mention the
willfulness element. After the system's attorney asked the court
about that element at the hearing, the court made the findings
quoted above.
It also does not matter that the court did not specify
who caused the board to defy the order. It was the system which
the court held in contempt. It also does not matter that the
court stated that it did not find that Laird was being dishonest,
because the court found that "somebody influenced the board" and
caused it to act "with the particular intent of defying my order
. . . ."
C. The Finding of Willfulness Was Not Clearly Erroneous.
We also conclude that there was sufficient evidence to
support the finding of willfulness. This included Laird's
testimony that he had written the first draft of the board's
letter, but that it was "reviewed by a number of people before it
was finalized." This testimony permits an inference that the
reason the information was mailed untimely was delay in drafting
and revising the letter the board wanted to send with the
intention of contradicting and "undermining" the court's reasons
for the award and the court's comments responding to criticism of
class counsel. Further, the court's stated purpose for ordering
the informational mail-out requires an inference that,
notwithstanding Laird's personal innocence, the system
collectively recognized the importance of simultaneously sending
the court's comments when it made any payments to members of the
class. This evidence also permits an inference that the system
willfully violated the order by beginning to make payments to the
class members some three weeks before it sent the court's
explanatory comments.
We also reject the system's assertions that the April 6
order was ambiguous. The order specified that the court's
comments were to be sent to "each of the APFRS members . . . no
later than the date enhancements are distributed to retirees."
This language made it clear that payment could not be made to a
member before the information was sent to that member. Further,
as appellees argue on appeal, there is no indication the system's
attorney, Klausner, thought the information-distribution
requirement was ambiguous. The letters class counsel and
Klausner exchanged in May and early June 2000 strongly imply that
Klausner understood that the information was to have been mailed
when the payments began. As the days passed and class counsel
became more strident and even threatened a contempt request,
Klausner never asserted that the mail-out requirement was
ambiguous or that the system had months in which to comply.
These exchanges also tend to confirm the superior court's
suspicion that the system intentionally delayed sending the
court's comments to the members until the board could prepare and
send its letter "contradicting" the court's attorney's fees
findings.
The system also argues that because it was impossible
to make all of the payments simultaneously, it also would have
been impossible to comply with the April 6 order if it had been
written as the court interpreted it. But the impossibility of
paying each member on the same day did not prevent the system
from distributing the information to each member at the same time
it paid that member, or from sending the information to each
member before it made the first payment to any member.
D. Standard of Proof
The system contends that the court failed to apply the
reasonable doubt standard of proof. The reasonable doubt
standard of proof applies to criminal contempt proceedings.27 The
superior court did not specify the standard of proof it was
applying to the contempt proceeding. We have held in other
contexts that a trial court need not explicitly state all of its
factual findings so long as its findings are "adequate to reveal
its reasoning process."28 Courts elsewhere have held that a trial
court need not explicitly state the standard of proof it is
applying if there is no dispute about the applicable standard.29
We will normally assume that the trial court has applied the
correct standard. The court's August 22 clarification
order, which explained the changes to which Klausner was to
respond at the August 23 hearing, cited AS 09.50.010(5). That
statute defines contempt to include "disobedience of a lawful
judgment, order, or process of the court." Thus, the court was
aware that a violation of AS 09.50.010(5) encompassed violations
of court orders. The court was of course aware that it had
required the system to show cause why it should not be sanctioned
for violating a court order. Reported Alaska case law
establishes that subsection .010(5) deals with criminal, rather
than civil, contempt, at least if the court's purpose is to
punish rather than coerce.30 The sanction here had no possible
coercive effect. It is undisputed that the elements of criminal
contempt are subject to a beyond a reasonable doubt standard of
proof in Alaska. Decisions so holding are cited and described in
the annotations to AS 09.50.010.31 From this we can safely assume
the superior court recognized and applied the correct standard.
There is no indication the court applied some other
standard. The court did not mention the lesser preponderance or
clear and convincing standards. The contempt hearing commenced
with an oral argument by Klausner's counsel that emphasized the
punitive nature of the proceedings against Klausner. Referring
to the size of the maximum potential fine, counsel also requested
a jury trial and analogized to Baker v. City of Fairbanks,32 which
counsel described as stating that a large enough fine connotes
criminal conduct.
Given the context of these arguments, and absent any
reason to think otherwise, we assume the court applied the
correct standard of proof.
IV. CONCLUSION
For these reasons, we AFFIRM the order holding the
system in contempt.
_______________________________
1 Former Anchorage Municipal Code (AMC) 03.85.030-.040.
2 AMC 03.85.030(B), (C).
3 Gallion v. Municipality of Anchorage (Gallion I), 944 P.2d
436, 438-39
4 Id. at 439.
5 Id. at 439-40.
6 Id. at 443.
7 The class members moved for summary judgment in 1999. The
superior court held that the board owed a fiduciary duty only to
the members. It ruled that the members had no right to increased
benefits, but it directed the board to recommend a proposal to
the municipal assembly addressing the surplus. The municipality
intervened and cross-moved for summary judgment seeking to
establish a reversionary interest in the surplus. The court
denied the municipality's motion, finding no such interest
existed. Despite this order, the CSA granted the municipality $40
million from the surplus.
8 The system claimed that distributing the funds was a gradual
process that required the system to liquidate investments to
produce cash for distribution, educate the members about the
payments, and wait for each recipient to determine in what form
he or she wanted to receive payment before distribution of the
funds could begin.
9 The board's letter stated that it contained "court-related
materials from the hearing" on attorney's fees and stated that
they were sent because class counsel had asked the superior court
to order that they be sent. The letter then stated that the
board considered that sending the materials was a "waste of trust
assets." The letter also told members that the board "believed
that the award of additional [class counsel attorney's] fees, to
be deducted from [members'] benefit payments, was wrong."
10 The parties do not distinguish between the system and the
board for purposes of the issues on appeal.
11 Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979) (holding
that on questions of law we adopt rule "that is most persuasive
in light of precedent, reason, and policy").
12 E.g., A.B. v. State, Dep't of Health & Soc. Servs., 7 P.3d
946, 950 (Alaska 2000) (citation omitted) ("Whether the trial
court's findings comport with the child in need of aid statutes
is a question of law that this court reviews de novo.").
13 Alaska Rule of Civil Procedure 90(b) reads:
For every contempt other than [contempts
committed in the presence of the court], upon
a proper showing on ex parte motion supported
by affidavits, the court shall either order
the accused party to show cause at some
reasonable time, to be therein specified, why
he should not be punished for the alleged
contempt, or shall issue a bench warrant for
the arrest of such party. Such proceeding
may be commenced and prosecuted in the same
action or in an independent proceeding either
by the state, or by the aggrieved party whose
right or remedy in an action has been
defeated or prejudiced or who has suffered a
loss or injury by the act constituting a
contempt.
14 Matanuska Elec. Ass'n, Inc. v. Rewire the Board, 36 P.3d
685, 700-01 (Alaska 2001) (noting clear error standard when
reviewing contempt orders is "consistent with the deferential
review used by courts in other jurisdictions" and citing cases
illustrating deferential standards of other states).
15 The system's briefs focus on the April 6 order. In its oral
contempt order the superior court explicitly mentioned only the
April 6 order but also seemed to take the April 28 order into
consideration.
16 Johansen v. State, 491 P.2d 759, 763 (Alaska 1971) (citing
Gompers v. Buck's Stove & Range Co., 221 U.S. 418, 441 (1911)).
17 See Hutchison v. State, 27 P.3d 774, 779 (Alaska App. 2001).
18 In L.A.M. v. State, 547 P.2d 827, 831 (Alaska 1976), we
explained that the four elements of contempt are:
(1) the existence of a valid order directing
the alleged contemnor to do or refrain from
doing something and the court's jurisdiction
to enter that order; (2) the contemnor's
notice of the order within sufficient time to
comply with it; . . . (3) the contemnor's
ability to comply with the order; and (4) the
contemnor's willful failure to comply with
the order.
19 434 P.2d 679, 681 (Alaska 1967).
20 Taylor, 434 P.2d at 681 (citations omitted).
21 The system argues that class counsel's motion was
insufficient because it was not supported by affidavits. We have
ruled that the purpose of Civil Rule 90(b)'s affidavit
requirement is to ensure procedural due process for the person
charged. Taylor, 434 P.2d at 681-82. In Taylor we held that the
order to show cause specifying the contemptuous act satisfied the
notice requirement of procedural due process. In this case, the
motion for an order to show cause specified the allegedly
contemptuous acts and delineated what actions the system would
have to defend. An affidavit would have been redundant. See id.
22 Continental Ins. Cos. v. Bayless & Roberts, Inc., 548 P.2d
398, 407 (Alaska 1976) (citations omitted).
23 Rollins v. State ex rel. Municipality of Anchorage, 748 P.2d
767, 771 (Alaska App. 1988) (citing Hentzner v. State, 613 P.2d
821, 826 (Alaska 1980)).
24 Bayless & Roberts, 548 P.2d at 407 (citations omitted).
25 Id. at 400.
26 "[T]he contradiction of my findings" is a reference to the
letter the board wrote and sent out to the members with the copy
of the court's attorney's fees award. The letter the board wrote
expressed, among other things, the board's disagreement with the
court's April 6 order and attorney's fees award.
27 Continental Ins. Cos. v. Bayless & Roberts, Inc., 548 P.2d
398, 407 (Alaska 1976); Carter v. Brodrick, 750 P.2d 843, 845
(Alaska App. 1988).
28 Borchgrevink v. Borchgrevink, 941 P.2d 132, 137 (Alaska
1997) (holding in child custody context that court not required
to make "wrap-up" finding); see also Virgin v. Virgin, 990 P.2d
1040, 1047-48 (Alaska 1999) (noting that requiring "wrap-up"
finding "would unjustifiably elevate form over substance").
29 Ross v. Superior Court, 569 P.2d 727, 737 (Cal. 1977)
("[T]he applicability of the reasonable doubt standard to
contempt proceedings has . . . been firmly established in a long
line of California decisions, and thus in the instant case there
is no reason to depart from the normal presumption that the trial
court properly followed established law."); Johnson v. De Toledo,
763 A.2d 28, 32 (Conn. App. 2000); In re C.T., 724 A.2d 590, 597
(D.C. 1999); State v. Kotis, 984 P.2d 78, 99 (Haw. 1999); State
v. Hazelton, 985 P.2d 698, 701 (Kan. 1999); Ex parte Jackson, 911
S.W.2d 230, 234 (Tex. App 1995) ("While relator is apparently
correct that a `beyond a reasonable doubt' standard should be
applied, there is no evidence that a lesser standard was applied.
The trial court, sitting without a jury is presumed to have used
the correct standard of proof absent a showing to the
contrary.").
30 L.A.M. v. State, 547 P.2d 827, 832 (Alaska 1976).
31 See, e.g., Continental Ins. Cos. v. Bayless & Roberts, Inc.,
548 P.2d 398 (Alaska 1976).
32 471 P.2d 386 (Alaska 1970).
