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Hawken Northwest, Inc. v. State, Dept. of Administration (8/22/2003) sp-5730
Hawken Northwest, Inc. v. State, Dept. of Administration (8/22/2003) sp-5730
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
HAWKEN NORTHWEST, INC. )
and ADEC, J.V., ) Supreme Court No. S-10455
)
Appellants, ) Superior Court No.
) 1JU-00-839 CI
v. )
) O P I N I O N
STATE OF ALASKA, )
DEPARTMENT OF ) [No. 5730 - August 22, 2003]
ADMINISTRATION, )
)
Appellee. )
)
Appeal from the Superior Court of the State
of Alaska, First Judicial District, Juneau,
Patricia A. Collins, Judge.
Appearances: Robert C. Erwin and Roberta C.
Erwin, Erwin & Erwin, LLC, Anchorage, for
Appellants. William F. Cummings, Assistant
Attorney General, and Bruce M. Botelho,
Attorney General, Juneau, for Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Bryner, Justices. [Carpeneti,
Justice, not participating]
BRYNER, Justice.
I. INTRODUCTION
Dale Young/Hawken Northwest, Inc., and ADEC, J.V.,
(collectively, Hawken) appeal the Department of Administration's
decision awarding Hawken $194,097.09 in damages for breach of
contract against the State of Alaska. Hawken asserts that it is
entitled to significantly greater damages because the two
releases it signed were invalid as a result of economic duress;
the construction specifications were ambiguous; the department
breached the implied covenant of good faith and fair dealing; and
the department erroneously denied prejudgment interest. Because
the hearing officer's findings and conclusions are supported by
substantial evidence and are correct as a matter of law, we
affirm the department's decision.
II. FACTS AND PROCEEDINGS
A. Facts
In November 1988 the Department of Administration
issued an invitation to bid for a lease of laboratory space in
Juneau for the Department of Environmental Conservation. The
invitation to bid provided for an initial ten-year lease term
with options for the department to renew the lease for two
additional five-year terms. Because no existing facility in
Juneau met the specifications for laboratory space, the
invitation effectively required construction of a new building.
Hawken submitted the lowest bid for the laboratory
lease, but the department canceled the invitation to bid in March
1989, determining that it was in the department's best interests
to reject all bids without an award. Hawken protested, its
protest was ultimately upheld, and Hawken was eventually awarded
the contract.
On July 24, 1989, state contracting officer Walt Harvey
issued a formal notice of the award to Hawken. Two days later, a
letter from Harvey advised Hawken that the occupancy date for the
new building would be extended in light of the delay in awarding
the contract and that the department would sign a lease agreement
with Hawken when the laboratory was ready for occupancy.
Harvey's letter also reminded Hawken of its obligation to submit
a floor plan within forty-five days and evidence of a financial
commitment within sixty days. Harvey noted that failure to
comply with these deadlines would be cause for default.
Hawken's first financing proposal was a lease-purchase
arrangement under which the department would own the building at
the end of the lease. The department rejected this proposal as
not complying with the invitation to bid requirements and gave
Hawken an extension of its sixty-day financing deadline. Hawken
next submitted a series of proposals for financing through tax-
exempt bonds issued by various parties. The department was
concerned about the potentially adverse consequences for the
department's credit rating posed by this kind of arrangement and
retained special bond counsel to review the financing proposals.
On October 2, 1989, Hawken requested an extension for
the laboratory completion date based on what it saw as the
department's delay in reviewing the proposed financing documents.
Hawken pointed out that the delay meant that it was now facing a
fall start date and winter construction. The department denied
the extension, asserting that any delays resulted from Hawken's
failure to arrange financing that complied with the invitation to
bid. Contracting officer Harvey also stated that Hawken should
have anticipated increased costs associated with winter when it
submitted its bid.
During this period of financing negotiations, a
controversy arose over whether Alaska's Little Davis-Bacon Act1
would apply to the laboratory construction project. Two Juneau
labor unions filed a declaratory judgment action against the
department to establish that the project amounted to "public
construction" subject to Little Davis-Bacon prevailing wage
requirements.2 The department advised Hawken of the suit and
asked whether its bid included sufficient amounts to pay
prevailing wages. Hawken responded that its bid was not
calculated based on payment of Little Davis-Bacon wages but
included sufficient funds to pay them.
At about the same time - October 1989 - Hawken
requested that the department sign the laboratory lease so that
Hawken could pursue tax-exempt financing. The department
indicated its reluctance to sign before the building was ready
for occupancy but offered to do so in exchange for including
lease provisions requiring Hawken to indemnify the department
against liability for payment of Little Davis-Bacon Act
prevailing wages and to release the department from all claims
arising from alleged defects in the invitation to bid
specifications. A lease containing these provisions was executed
on November 13, 1989.
Numerous construction disputes regarding deadlines,
delay, modifications, and increased costs occurred during the
year following the lease's signing. An especially thorny
controversy arose over the building's heating, ventilation, and
air-conditioning (HVAC) system - particularly the ventilation
system for the laboratory's fume hoods. Hawken hired an
engineering firm, USKH, to prepare the mechanical design plans
for the laboratory but initially failed to provide USKH with an
amendment to the contract specifications that required a variable
air volume fume hood system;3 Hawken sent USKH the amended
specifications only after USKH completed a mechanical design plan
specifying a constant volume ventilation system. Hawken proposed
USKH's initial plan to the department, maintaining that the
constant volume system was an improvement over the variable air
volume system specified in the amended invitation to bid and
proposing, alternatively, that the constant volume system could
be modified to work with variable air volume fume hoods. After
consulting with an engineer, the department rejected these
proposed alternatives. USKH later redesigned the mechanical
plans to provide a variable air volume system, as required by the
amended specifications.
Meanwhile, in November 1989, Hawken was still
attempting to secure tax-exempt financing for the laboratory
project by issuing bonds through a public or non-profit entity.
Hawken began negotiating with the City of Kasaan and determined
that an assignment of the department lease from Hawken to the
city would be required. On January 31, 1990, Hawken requested
the department's approval of the proposed assignment. The
department's special bond counsel reviewed the proposed financing
and raised concerns regarding the department's potential
liability on the bonds. The Commissioner of Revenue, a member of
the state bond committee, subsequently advised against approving
the assignment until these wrinkles could be ironed out.
Hawken requested an additional extension to complete
the laboratory, expressing frustration over the department's
delay in approving the proposed bond arrangement; the department
denied the request, responding that any delays concerning
financing were the result of Hawken's proposal of alternative
financing approaches that conflicted with the invitation to bid.
To resolve the department's remaining concerns
regarding the proposed bond financing, Hawken obtained an
irrevocable letter of credit from Sumitomo Trust & Banking
Company acknowledging that the department had no liability on the
bonds to be issued by the City of Kasaan. On September 14, 1990,
the department offered to consent to the assignment of the lease
to the City of Kasaan and to extend the occupancy date for the
laboratory until April 30, 1991, if Hawken released the
department from any claims arising from the delays caused by its
review of the lease financing proposals. Hawken agreed to these
terms and, on September 27, 1990, executed a release in return
for the department's consent to the assignment of the lease to
the City of Kasaan.
Although some preliminary construction work had been
done before these financing arrangements were completed, most of
the construction work occurred between October 1990 and October
1991. The department accepted occupancy of the laboratory on
October 26, 1991.
B. Proceedings
Hawken filed claims for breach of contract under the
state procurement code on August 27, 1993, asserting financing
and construction damages in excess of seven million dollars.
After contracting officer Harvey denied all claims, Hawken
appealed to the Commissioner of the Department of Administration.
A fifteen-day administrative hearing was conducted before a
hearing officer.
In a 106-page decision, the hearing officer found that
a number of factors had delayed construction: Hawken's inability
to arrange financing that conformed to the original invitation to
bid specifications and the time consumed by Hawken's efforts to
arrange alternative financing that met with the department's
approval; the need to implement revised mechanical plans for the
laboratory's fume hood system; the need to clarify the
mechanical, electrical, and equipment specifications in the
original invitation to bid; severe winter weather conditions;
Hawken's deficient project management; and Hawken's installation
of a sprinkler system instead of the originally specified Halon
fire suppression system. The hearing officer also found that
both the releases signed by Hawken were valid and that they
effectively released all construction claims against the
department through September of 1990. Based on these findings,
the hearing officer recommended awarding Hawken only $194,097.09
in damages, plus prejudgment interest on its award. On remand
from the commissioner, however, the hearing officer reconsidered
the award of prejudgment interest and concluded that it was not
legally permissible. The commissioner adopted the hearing
officer's amended recommendations, and the superior court
affirmed the department's decision in all respects. Hawken
appeals.
III. DISCUSSION
A. Standard of Review
We independently review decisions made by the superior
court as an intermediate court of appeal.4 When reviewing an
administrative decision, we apply our independent judgment to
resolve questions of law not involving agency expertise.5 We
review agency factfinding under the substantial evidence test,6
upholding the findings when they are supported by "such relevant
evidence as a reasonable mind might accept as adequate to support
a conclusion."7 If the agency's findings are supported by
substantial evidence, we "do not choose between competing
inferences or evaluate the strength of the evidence."8
B. Hawken's Releases
Hawken signed two releases: the first was incorporated
into the November 13, 1989, Standard Lease Form, and the second
was the September 27, 1990, Agreement and Mutual Release. Hawken
argues that both are void because they were signed under economic
duress.
A signed release agreement may only be invalidated for
economic duress when (1) one party involuntarily accepted the
terms of another, (2) circumstances permitted no other
alternative, and (3) the circumstances were the result of
coercive acts by the other party.9 The party claiming economic
duress must prove all three prongs by clear and convincing
evidence.10
The test for the first prong simply requires an
assertion of subjectively involuntary acceptance.11 Hawken's
claim of economic duress satisfied this prong.12
The second prong's determination of whether an
alternative to accepting the release terms was available is
objective.13 It required Hawken to show that it had "no
reasonable alternative to agreeing" to the department's terms or
"no adequate remedy if the [department's] threat were to be
carried out."14 Whether a reasonable alternative existed is a
question of fact that depends on the circumstances of the case.15
"An available legal remedy, such as an action for breach of
contract, may provide such an alternative," but may be inadequate
"where the delay involved in pursuing that remedy would cause
immediate and irreparable loss to one's economic or business
interest."16
Under the third prong, Hawken was required to show that
the department intentionally caused it to enter into the releases
through "wrongful acts or threats."17 Wrongfulness depends on the
circumstances of the case but may be proved by conduct that is
criminal, tortious, or morally reprehensible.18 In addition to
proof of coercive acts by the other party, the third prong
requires a causal link between those acts and the circumstances
of the releasing party's economic duress.19
1. November 1989 release
In November 1989 Hawken agreed to sign a release in
exchange for the department's agreement to sign a lease on the
new laboratory building in advance of its construction. The
release, which was incorporated into the lease agreement,
required that Hawken indemnify the department for Little Davis-
Bacon wage claims and released the department from any and all
claims by Hawken related to the department's actions or omissions
in soliciting bids under its invitation to bid.
The hearing officer found that the 1989 release was
valid and not the product of economic duress, ruling that Hawken
had failed to satisfy prongs two and three of the economic duress
test, because Hawken had other reasonable alternatives and the
department did not engage in coercive conduct or cause Hawken's
financial instability.
As to the second prong, the hearing officer noted that
construction had not yet begun when Hawken signed the release and
that Hawken had not yet entered into any major subcontractor
agreements. Because Hawken had made no binding financial
commitments at this early stage, the hearing officer reasoned,
the company had failed to prove that executing the release was
its only reasonable alternative. In addition, the officer found
that Hawken had confirmed that its original bid included enough
to pay the Little Davis-Bacon wages. The officer decided that
"[u]nder these circumstances, Hawken has not persuasively
demonstrated that pursuing a contract claim or lawsuit would have
caused immediate and irreparable loss to Hawken's economic
interests."
With regard to the third prong, the hearing officer
determined that the department's conduct did not amount to "a
wrongful exploitation of Hawken's financial and bargaining
position." The officer found that Hawken derived a significant
benefit from the release agreement because the agreement required
the department to execute a premature lease, which entitled
Hawken to pursue tax-exempt financing. Thus, in the hearing
officer's view, Hawken received ample consideration for the
release and indemnification. Moreover, the hearing officer found
no evidence of improper conduct on the department's part and
noted, "[e]ven if [the department's] conduct [was] considered to
be coercive or wrongful, there was no causal link between such
conduct and [Hawken's] financial condition." Instead, the
hearing officer attributed Hawken's troubled finances to a
stagnant local economy and difficulties with other projects and
investments.
Hawken contends that the hearing officer's findings are
not supported by substantial evidence. Hawken asserts that it
was in a severe financial condition, on the verge of bankruptcy,
and that its desperate situation was communicated to the
department. The company argues that it would have lost
everything if it did not agree to sign the release because it
could not build the laboratory without the financing, which it
could not obtain without the signed lease. Thus, Hawken claims,
it was forced to accept the department's terms. According to
Hawken, pursuit of a contract claim under these circumstances,
which the hearing officer found to be a reasonable alternative,
would have resulted in bankruptcy for the company.
But substantial evidence supports the hearing officer's
findings on the existence of reasonable alternatives. As the
hearing officer noted, Hawken had not begun construction, had not
signed any major subcontracts, and had not yet managed to obtain
approved financing. Although Hawken insists that the financing
it desperately needed depended on the department's willingness to
sign a long-term lease for the laboratory, the terms of Hawken's
contract obligated the department to lease the building only upon
its completion. The release agreement thus required important
concessions by both parties: in return for Hawken's release of
potential claims, the department gave up its right to wait for
the laboratory's completion before entering into a binding lease.
Moreover, while Hawken's available alternatives may
well have resulted in further delay, the record supports the
hearing officer's finding that Hawken failed to establish that
the delay would have caused immediate and irreparable loss.
Hawken repeatedly asserts that it would have been forced into
bankruptcy if it had not agreed to the release, but it fails to
identify any substantial evidence to support these assertions.20
Because the hearing officer's finding that Hawken failed to prove
economic duress is not clearly erroneous, we affirm his
conclusion that the November 1989 release was validly executed.
Our holding on this point makes it unnecessary to
consider whether Hawken met its burden of establishing that the
department engaged in the coercive conduct that caused its
financial duress.
2. September 1990 release
Hawken signed the second release in exchange for the
department's consent to Hawken's assignment of the laboratory
lease to the City of Kasaan. The language of this release
agreement explicitly acknowledged that Hawken had a potential
claim against the department for failing to promptly consent to
the assignment and that the department had a potential claim
against Hawken for its failure to deliver the laboratory building
on deadline. Under the agreement, the occupancy deadlines were
extended and the parties released each other from "any and all
claims" related to the assignment and lease amendment dispute
referred to in the agreement.
The hearing officer upheld this release, finding that
Hawken had met its burden of proving involuntariness and the lack
of a reasonable alternative but had failed to prove that its
situation was caused by the department's misconduct. The hearing
officer found that "by September 1990 Hawken's financial and
contractual commitments to the laboratory project were so
substantial that the delay involved in pursuing a legal remedy
would likely have caused immediate and irreparable economic harm,
potentially including bankruptcy." Moreover, the hearing officer
noted, Hawken had spent considerable time and expense in
preparation for the bond sale. Given these circumstances, the
hearing officer was convinced that "by the time the bond closing
occurred in September 1990, Hawken's economic circumstances did
not permit a reasonable alternative or adequate remedy at law to
signing the mutual release."
But the hearing officer remained unconvinced that the
department coerced Hawken into signing the release by engaging in
wrongful actions. The officer found that Hawken's decision to
pursue tax-exempt financing was the primary cause of its strained
financial condition and, consequently, that "the circumstances of
Hawken's duress were largely of its own making, not the result of
the [department's] improper or coercive conduct." Moreover, the
hearing officer found, the release was not exploitive; it
entailed a compromise of substantial and genuinely disputed
claims by both sides: Hawken released its potential claims
relating to the department's delay in approving Hawken's lease
assignment; and by extending the deadline for completion, the
department relinquished its potential claims for Hawken's delay
in delivering a completed building. Thus, the hearing officer
found insufficient evidence of misconduct and causation.
Hawken challenges these findings as unsupported and
clearly erroneous, contending that the release was tantamount to
a threat because it was executed on the eve of the bond sale and
the department knew that Hawken would be forced into bankruptcy
if the bond sale failed.
The department disputes Hawken's characterization of
the events preceding the release, contending that Hawken had the
opportunity to consult with counsel before agreeing to the
release and could have changed its mind during the thirteen-day
period between the date Hawken notified the department of its
agreement and the date of the release's execution. According to
the department, the release was simply a reasonable business
decision by both parties.
In our view, the record supports the department's
position on this point, which is in accord with the hearing
officer's findings. Although Hawken presented evidence to
support its position, the hearing officer could properly weigh
the conflicting evidence and decide that its evidence was less
credible.
Hawken also maintains that the department's conduct was
wrongful because the department knew that the bond sale would
collapse unless the lease was assigned and took unfair advantage
of the situation by demanding the release. But it is unclear
whether the department's contract with Hawken obliged it to
consent to the proposed lease assignment. More important, as
already noted, the release was mutual, involving a relinquishment
of substantial claims by both parties. Given these circumstances,
the hearing officer could properly find that Hawken failed to
prove any conduct by the department that was criminal, tortious,
or even ethically wrongful.21
More fundamentally, the hearing officer could properly
find that Hawken failed to prove a clear causal link between the
department's opportunistic conduct and the circumstances that
left Hawken with no choice but to agree to the release. Although
Hawken insists that the department took unfair advantage of
Hawken's financial instability, it fails to explain how the
department's alleged misconduct caused those financial
difficulties. As we have held, "economic necessity - very often
the primary motivation for compromise - is not enough, by itself,
to void an otherwise valid release."22
The facts in this case are analogous to those in
Northern Fabrication Co., Inc. v. UNOCAL, where we stated that a
party "is not allowed to use its financial weakness as a sword to
negate a properly executed release."23 There, the plaintiff
seeking to void the release agreement, Northern Fabrication,
attributed problems that led to significant cost overruns and
delays to the defendant, UNOCAL.24 UNOCAL offered to compromise
by paying half of the cost overrun; after six weeks, Northern
Fabrication accepted UNOCAL's offer and signed a general release.25
Alleging that UNOCAL knew of Northern Fabrication's
bankruptcy history, Northern Fabrication argued that the company
exploited Northern Fabrication's distressed financial condition
by offering only half of what UNOCAL owed.26 We nevertheless
upheld the release, finding that Northern Fabrication had failed
to establish the third prong of the economic duress test because
it had not produced clear and convincing evidence of either a
coercive act on UNOCAL's part or a causal link between UNOCAL's
conduct and Northern Fabrication's shaky finances.27 We
concluded, under those circumstances, that "[c]learly the dispute
with UNOCAL contributed to Northern Fabrication's financial
instability. However, without evidence that UNOCAL did anything
criminal, tortious or even merely wrongful in the moral sense,
there is no factual dispute on the third prong of the test for
economic duress."28
Our holding in Northern Fabrication governs this case.
Like Northern Fabrication, Hawken "may not use the courts to re-
examine the dispute simply because its financial situation
limited its options at the time the release was signed."29
Because the record supports the hearing officer's finding that
Hawken failed to establish either coercive misconduct or a causal
connection, we uphold the hearing officer's conclusion that the
September 1990 release was valid.
Our affirmance of the hearing officer's findings that
Hawken failed to prove misconduct or bad faith by the department
in connection with the 1989 and 1990 releases necessarily
forecloses Hawken's separate claims that the department violated
the covenant of good faith and fair dealing in obtaining these
releases.
C. Ambiguity of the HVAC Specifications
Hawken claims various damages in connection with the
department's insistence that the HVAC system be redesigned to use
a variable air volume system rather than a constant volume
system, as required by the amended specifications. Hawken claims
that the original construction specifications were "performance
specifications," rather than "design specifications." According
to Hawken, this gave it sole discretion to design and construct
any type of HVAC system that would meet the performance
specifications. Because its constant flow system met the
specified performance standards, Hawken alleges that the
department should bear the cost of requiring Hawken to change to
a variable air volume system.
But the hearing officer concluded that this claim would
be barred under Hawken's 1989 release, even assuming that it had
legal merit. We agree. The November 1989 lease release covered
all claims "directly or indirectly" related to the department's
"actions or omissions in soliciting bids for laboratory and
office space under [the invitation to bid]." Since the plain
language of the release applies to the HVAC claim, our decision
that the release is valid disposes of the claim.
Our conclusion on this point also disposes of Hawken's
related argument that the department's rejection of its HVAC
design violated the covenant of good faith and fair dealing.
D. Implied Covenant Claim
Hawken claims that the department used its superior
bargaining position to impose numerous roadblocks and
unreasonable demands and maintains that the department's lack of
cooperation doubled the cost of construction and cost Hawken
ownership of both the building and the lease. According to
Hawken, this conduct amounted to a breach of the covenant of good
faith and fair dealing.
The covenant of good faith and fair dealing is implied
in every contract to give effect to the reasonable expectations
of the parties, preventing each party from interfering with
another party's right to receive the benefits of the agreement.30
The implied covenant has both a subjective and an objective
prong.31 "The subjective prong prohibits one party from acting to
deprive the other of the benefits of the contract."32 The
objective prong requires both parties to act in a way that a
reasonable person would consider fair.33
1. Cancellation of bids
During the interim period between the department's
cancellation of the invitation to bid and its reinstatement after
Hawken's protest, the department was engaged in discussions with
the University of Alaska and the U.S. Forest Service regarding a
joint laboratory facility construction project. Hawken asserts
that the department breached the covenant of good faith and fair
dealing by rejecting all bids and secretly using Hawken's bid as
a benchmark for negotiations regarding the joint laboratory.
The hearing officer found this claim to be meritless,
ruling that the department's decision to cancel all bids was not
made in bad faith and that, in any event, Hawken was estopped
from asserting this claim by its successful renewal of its bid.
Although we believe that substantial evidence supports
the hearing officer's findings, we need not decide the point on
its merits, since it is barred by the November 1989 release,
which covers all claims directly or indirectly related to the
department's conduct in soliciting bids.
2. Imposition of deadlines
Hawken next claims that the department breached the
covenant of good faith and fair dealing by stalling its award of
the contract and then threatening Hawken with immediate default
unless it submitted scale drawings in forty-five days and proof
of financing in sixty days. The department responds that it
merely reminded Hawken of applicable contractual deadlines -
deadlines that Hawken had chosen to accept.
The hearing officer rejected Hawken's claim, finding
that "the [department's] notification of potential default in the
event of noncompliance with the [invitation to bid] was
consistent with the contract, was not a threat to breach the
contract, and was not done in bad faith."
We agree. Substantial evidence supports the finding of
a lack of subjective bad faith, and it was not objectively unfair
for the department to remind Hawken of its contractual
obligations.
3. Financing delays
Hawken also maintains that the department breached the
covenant of good faith and fair dealing by delaying its approval
of Hawken's proposal to arrange financing through tax-exempt
bonds. The hearing officer found the department's delay
reasonable in light of the bonding proposal's novelty and
complexity. But we need not reach the merits of this claim,
since it is barred by the 1990 release. After recognizing that
Hawken had potential claims against the department for failing to
promptly consent to its bond proposal, the 1990 release agreement
expressly released the department from "any and all claims"
related to this delay. Our decision upholding the release thus
disposes of this claim.
E. Prejudgment Interest on Hawken's Award of Damages34
The hearing officer initially recommended that interest
be awarded on Hawken's damages from the date of the department's
occupancy of the laboratory until paid. The Commissioner of
Administration remanded the matter, directing the hearing officer
to reconsider whether the commissioner had authority to award
interest on a claim under the state procurement code. The
hearing officer concluded on reconsideration that Hawken was not
entitled to prejudgment interest on the damages awarded. Hawken
challenges this conclusion.
We have consistently stated that prejudgment interest
may not be assessed against the state unless specifically
authorized by legislation.35 "In other words, only the
legislature can waive the state's sovereign immunity and
authorize an award of prejudgment interest against the state."36
Hawken filed its claims under the state procurement
code,37 the claims are "contract controversies" under AS
36.30.620,38 and they were appealed under AS 36.30.625.39 The
procurement code does not specifically authorize prejudgment
interest on awards under these provisions.
A provision allowing prejudgment interest on awards
against the Department of Transportation and Public Facilities
was added to the procurement code after Hawken filed this suit.40
We assume for present purposes that this provision would extend
to de facto construction contract claims filed against agencies
other than the Department of Transportation and Public
Facilities. Our conclusion that the statute did not apply
retroactively to Hawken's claim makes it unnecessary to decide
the issue here. Hawken asserts that this provision applies to
all cases pending on the provision's effective date. But the
legislature specified that the prejudgment interest provision
would apply only to "[c]ontroversies for which a claim is filed
with an agency . . . on or after the effective date of this act."41
Because Hawken did not file its action on or after the statute's
effective date, the new provision does not apply.
Since the procurement code does not provide a basis for
Hawken's prejudgment interest claim, its claim could only be
granted if it fell under AS 09.50.280.42 We have recently
interpreted this statute in cases similar to Hawken's, concluding
that it does not authorize awards of prejudgment interest
against the state in administrative appeals.43 These decisions
directly control Hawken's claim and preclude an award of
prejudgment interest.
IV. CONCLUSION
We AFFIRM the department's award.
_______________________________
1AS 36.05. This act requires that workers on public construction
projects receive at least the current prevailing wage. AS
36.05.010.
2AS 36.05.010; AS 36.95.010.
3Amendment 1 to the invitation to bid, which the department
issued on December 6, 1988, described numerous changes and
additions to the specifications in the original invitation to bid
and stated, "All fume hoods shall be variable air volume type."
4Anderson v. State, Dep't of Revenue, 26 P.3d 1106, 1108-09
(Alaska 2001); Handley v. State, Dep't of Revenue, 838 P.2d 1231,
1233 (Alaska 1992).
5E.g., Anderson, 26 P.3d at 1109.
6E.g., id.
7Handley, 838 P.2d at 1233 (quotation marks omitted) (quoting
Keiner v. City of Anchorage, 378 P.2d 406, 411 (Alaska 1963)).
8Lopez v. Adm'r, Pub. Employees' Ret. Sys., 20 P.3d 568, 570
(Alaska 2001); see also Anderson, 26 P.3d at 1109.
9Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Serv. Co.,
584 P.2d 15, 21 (Alaska 1978).
10Helstrom v. N. Slope Borough, 797 P.2d 1192, 1197 (Alaska 1990).
11Zeilinger v. SOHIO Alaska Petroleum Co., 823 P.2d 653, 657
(Alaska 1992).
12See N. Fabrication Co., Inc. v. UNOCAL, 980 P.2d 958, 960
(Alaska 1999) (describing first prong requirement as "almost
meaningless").
13Zeilinger, 823 P.2d at 658.
14Totem Marine, 584 P.2d at 22.
15Id.
16Id.
17Id.
18Id.
19Zeilinger v. SOHIO Alaska Petroleum Co., 823 P.2d 653, 658
(Alaska 1992).
20The record citations in Hawken's brief refer to the following:
testimony that Hawken's owner, Dale Young, was worried about the
company's finances on an unspecified date; Young's testimony that
his real estate holdings were in danger sometime during the
period between December 1988 and March of 1989; and testimony
that at the time of the release, there was concern about Hawken's
possible exposure for the difference in bids if the department
canceled the award and went with the next lowest bidder. This
testimony provides only weak support for Hawken's assertion that
bankruptcy was certain if the signed lease was not obtained.
These after-the-fact expressions of subjective concern are not
substantial evidence sufficient to establish clear and convincing
proof of immediate and irreparable economic loss.
21See Totem Marine, 584 P.2d at 22.
22Zeilinger, 823 P.2d at 658 (holding no economic duress by
employer where inducement to release claims was employee's
burdensome financial circumstances that were of her own making).
23980 P.2d 958, 962 (Alaska 1999).
24Id. at 960.
25Id.
26Id.
27Id. at 961.
28Id. (quotation marks omitted) (quoting Helstrom v. N. Slope
Borough, 797 P.2d 1192, 1198 (Alaska 1990)).
29Id.
30McConnell v. State, Dep't of Health & Soc. Servs., 991 P.2d 178,
184 (Alaska 1999); accord Restatement (Second) of Contracts 205
(1981) ("Every contract imposes upon each party a duty of good
faith and fair dealing in its performance and its enforcement.").
31McConnell, 991 P.2d at 184.
32Id.
33Id.
34Our decision upholding the releases and rejecting Hawken's
implied covenant claims makes it unnecessary to decide any aspect
of Hawken's arguments on damages except prejudgment interest.
Hawken acknowledges that the damages issue is "somewhat murky,"
but asserts that "if th[is] court decides that there is bad faith
or the releases are invalid," we should require a hearing to
reconsider damages. Although Hawken devotes numerous pages to a
discussion of the specific aspects of damages that it claims were
incorrectly awarded, its arguments appear to be offered to
establish the need for a remand in the event that Hawken prevails
on either the economic duress or the covenant claims.
35Samissa Anchorage, Inc. v. State, Dep't of Health & Soc. Servs.,
57 P.3d 676, 679 (Alaska 2002); Danco Exploration, Inc. v. State,
Dep't of Natural Res., 924 P.2d 432, 434 (Alaska 1996); Stewart &
Grindle, Inc. v. State, 524 P.2d 1242, 1245 (Alaska 1974).
36Samissa, 57 P.3d at 679.
37AS 36.30.
38AS 36.30.620 provides, in part: "Contract controversies. (a) A
contractor shall file a claim concerning a contract awarded under
this chapter with the procurement officer."
39AS 36.30.625 provides, in part: "Appeal on a contract
controversy. (a) An appeal from a decision of the procurement
officer on a contract controversy may be filed by the contractor
with the commissioner of administration . . . ."
40AS 36.30.623 provides, in part: "Interest on certain
controversies. The amount ultimately determined to be due . . .
accrues interest at the [statutory] rate applicable to judgments
. . . . In this section, "department" means the Department of
Transportation and Public Facilities."
41Ch. 98, 4, SLA 2001 (emphasis added).
42AS 09.50.280 authorizes prejudgment interest against the state
for certain contract, quasi-contract, and tort claims covered by
AS 09.50.250.
43See Quality Asphalt Paving, Inc. v. State, Dep't of Transp. &
Pub. Facilities, 71 P.3d 865, 878-80 (Alaska 2003); Samissa
Anchorage, Inc. v. State, Dep't of Health & Soc. Servs., 57 P.3d
676, 680 (Alaska 2002); Danco Exploration, Inc. v. State, Dep't
of Natural Res., 924 P.2d 432, 434 (Alaska 1996).
