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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Reust v. Alaska Petroleum Contractors, Inc. (04/10/2009) sp-6359
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
| DAN REUST, | ) |
| ) Supreme Court No. S- 12863 | |
| Appellant, | ) |
| ) Superior Court No. 3KN-99- 132 CI | |
| v. | ) |
| ) O P I N I O N | |
| ALASKA PETROLEUM | ) |
| CONTRACTORS, INC., | ) No. 6359 April 10, 2009 |
| ) | |
| Appellee, | ) |
| ) | |
| and | ) |
| ) | |
| STATE OF ALASKA, | ) |
| ) | |
| Appellee/Intervenor. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District, Kenai,
Charles T. Huguelet, Judge.
Appearances: Arthur S. Robinson, Robinson &
Associates, Soldotna, for Appellant. Ruth
Botstein, Assistant Attorney General, Talis
J. Colberg, Attorney General, Anchorage, for
Appellee/Intervenor State of Alaska.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Carpeneti, and Winfree, Justices.
MATTHEWS, Justice.
This case is here for the second time.1 After a jury
awarded Dan Reust compensatory damages of $389,000 and punitive
damages of $4.3 million in a retaliatory discharge suit against
his employer, Alaska Petroleum Contractors (APC), the State was
permitted to intervene to protect its interest in the punitive
damages award.2 The superior court reduced the punitive award to
$500,000 using the cap provisions of AS 09.17.020(h) and required
that half of the net award of punitive damages be paid to the
State.3 Reust and APC appealed. We held on appeal that (1) the
provisions of AS 09.17.020 awarding fifty percent of punitive
damages to the State and capping punitive damages are
constitutional; (2) the State was properly permitted to
intervene; (3) Reusts award of lost wages should be limited to
three years after termination, rather than ten as the jury
determined; and (4) the cap provisions of subsection .020(f)
rather than (h) should have been used.4 We remanded the case to
the superior court with instructions to reduce the lost wages
award to three years, to apply the punitive damages cap expressed
in subsection .020(f), and to consider whether the recalculated
punitive award would be excessive.5
After our opinion was published, Reust and APC entered
into a settlement agreement. Under the agreement APC paid Reust
$1 million6 in exchange for a release of all claims. Reust
agreed to defend and indemnify APC from any claims by the State
for punitive damages, and agreed to place $200,000 of the
settlement proceeds in the court registry so those proceeds would
be available should the State assert any claim it might have for
punitive damages. Reust and APC then filed a stipulation for
dismissal in the superior court. The State objected to
dismissal, noting that it was a party to the action, that it had
not agreed to the stipulation or the settlement, and that it had
not received its share of punitive damages.
The superior court refused to dismiss the case. In
making this ruling the superior court summarized Reusts position
that the State should receive nothing as follows: he argues that
the case is in the same posture as it would have been if the
parties settled before the jury delivered its verdict. The court
rejected this argument, stating that
[a]llowing plaintiffs to avoid dividing
punitive awards with the State by negotiating
a post-verdict settlement would frustrate the
purpose of AS 09.17.020(j). The State gained
an interest when the verdict awarding
punitive damages was published. The Supreme
Courts remand to determine the amount of
punitive damages does not eliminate the
interest.
After additional briefing, the superior court
calculated punitive damages under the subsection .020(f)(1) cap
to be $716,525.52,7 determined that this amount would not be
excessive, and ordered that half of this amount be paid to the
State after adjustments for a pro rata portion of Reusts counsels
fees expended in obtaining the award. Subsequently, the court
entered a final judgment granting the State $207,792.40 as its
net share of punitive damages to be recovered against Alaska
Petroleum Contractors (or plaintiff pursuant to the plaintiff and
defendants settlement agreement).
Reust appeals from this judgment.
He contends that the State has no interest in a
punitive damages award until a formal judgment is entered, rather
than, as the superior court held, when a verdict is returned.
Reust also argues that once this court reversed the punitive
damages judgment, the State no longer had an interest in the
settlement proceeds. We address these issues in turn.
A. The States Interest in a Punitive Damages Award
Attaches when a Verdict Is Returned.
The first sentence of AS 09.17.020(j) grants the State
a right to fifty percent of any punitive damages award, and the
second sentence provides that the subsection does not grant the
state the right to file or join a civil action to recover
punitive damages. Taken as a whole, this subsection is most
sensibly interpreted to mean that before a verdict is returned,
the State may not intervene in a claim seeking punitive damages;
however, once a verdict for punitive damages is returned, the
States interest in punitive damages comes into existence and the
State may intervene to protect this interest. A number of
reasons support this reading.
Variations of the word award are used throughout
AS 09.17.020 to refer to a verdict8 or to a verdict as adjusted
by a cap on damages.9 Thus, in subsection .020(j) the phrase
[i]f a person receives an award of punitive damages refers to the
receipt of a verdict and any adjustment of it necessitated by one
of the cap subsections, and not to receipt of a judgment nor, as
Reust also suggests, receipt of money paid pursuant to a
judgment.
We stated in Reust I: [I]t appears that the state
should always be permitted to intervene when there is any dispute
about how a punitive damages award is to be allocated.10 Because
this observation was made in the context of an intervention
request that was made before a judgment was entered, it supports
the conclusion we reach today.
It is hard to think that any other rule would make
sense. If by the device of a post-verdict settlement a plaintiff
could eliminate the need to recognize the States interest in
punitive damages, such settlements would almost always be
accomplished and the State would almost never receive its share
of punitive damages. The interpretation advocated by Reust
would, in other words, make subsection .020(j) nearly
meaningless. In Reust I we indicated that the purposes of
subsection .020(j) were to reduce the incentive for plaintiffs to
pursue punitive damages claims and encourage pretrial
settlements, since the state only shares in punitive damages when
an award is made.11 We also took note of the purpose of
[i]ncreasing state revenues by allocating a portion of punitive
damages awards to the state based on the analogy between such
awards and civil and criminal fines that underlies subsection
.020(j).12 These purposes would be frustrated, rather than
achieved, if we were to adopt Reusts position.
B. The States Interest in the Punitive Damages Award Was
Not Eliminated by Reust I.
Did our decision in Reust I return this case to its pre-
verdict status in which Reust would be free to settle without any
need to recognize the States interest? We answer in the negative
for the following reasons.
Our decision did not reverse the jurys determination
that punitive damages should be awarded; nor did it require a new
jury determination as to what the amount of punitive damages
should be. Instead, we required that the applicable cap on
punitive damages be calculated.13 This calculation entailed the
use of the formula set out in subsection .020(f)(1) three times
the award of compensatory damages.14 Our remand also required the
recalculation of compensatory damages.15 But this too was
accomplished based on the initial verdict without the need for a
new trial.16 Because no new trial was required, the States
interest that attached when the verdict was announced remained in
effect. It follows that Reust could not eliminate the States
interest by settling with APC.17
C. Post-Judgment Interest and Cost Adjustments.
Reusts final point on appeal is that post-judgment
interest should be set at the rate of interest that was in effect
at the time of the first judgment, 4.25%, rather than the rate on
judgments when the judgment after remand was issued, 9.25%. This
argument is based on Appellant Rule 509, which provides:
If a judgment for money in a civil case
is affirmed, interest at the rate prescribed
by law shall be payable from the effective
date of the judgment of the trial court. If
in a civil case a judgment is modified or
reversed with directions that a judgment for
money be issued by the trial court, interest
on the new judgment at the rate prescribed by
law shall be payable from the effective date
of the prior judgment which was modified or
reversed.
Reusts point is well taken and the State concedes it. The State
also suggests that in light of our decision in State v.
Carpenter,18 a pro rata share of Reusts costs, in addition to
attorneys fees, should have been deducted from the States share
of punitive damages. We agree. As we held in Carpenter, [i]n
order to ensure that the state is not unjustly enriched at the
expense of litigants, we read AS 09.60.080 to require a pro rata
deduction of costs from the states share of the punitive damages
award.19
For the above reasons, we conclude that this case
should be remanded to the superior court with instructions to
modify the judgment by changing the post-judgment rate of
interest on the judgment to 4.25% and by deducting Reusts pro
rata share of costs attributable to the States portion of the
award. Except for these changes, the judgment should be
affirmed.
AFFIRMED in part and REMANDED for modification.
_______________________________
1 See Reust v. Alaska Petroleum Contractors, Inc. (Reust
I), 127 P.3d 807 (Alaska 2005).
2 Id. at 810-11.
3 Id. at 811. AS 09.17.020(f), (h) and (j) are involved
in this case. These subsections provide:
(f) Except as provided in (g) and (h) of
this section, an award of punitive damages
may not exceed the greater of
(1) three times the amount of
compensatory damages awarded to the plaintiff
in the action; or
(2) the sum of $500,000.
. . . .
(h) Notwithstanding any other provision
of law, in an action against an employer to
recover damages for an unlawful employment
practice prohibited by AS 18.80.220, the
amount of punitive damages awarded by the
court or jury may not exceed
(1) $200,000 if the employer has less
than 100 employees in this state;
(2) $300,000 if the employer has 100 or
more but less than 200 employees in this
state;
(3) $400,000 if the employer has 200 or
more but less than 500 employees in this
state; and
(4) $500,000 if the employer has 500 or
more employees in this state.
. . . .
(j) If a person receives an award of
punitive damages, the court shall require
that 50 percent of the award be deposited
into the general fund of the state. This
subsection does not grant the state the right
to file or join a civil action to recover
punitive damages.
4 See Reust I, 127 P.3d at 817-18, 820-25.
5 Id. at 826.
6 The parties did not purport to allocate this sum
between punitive and compensatory damages.
7 The subsection .020(f)(1) cap is three times
compensatory damages. The superior court computed compensatory
damages as required in Reust I to be $238,841.84.
8 See for example, AS 09.17.020(a): If punitive damages
are allowed, a separate proceeding under (c) of this section
shall be conducted before the same fact finder to determine the
amount of punitive damages to be awarded. (Emphasis added.) See
also subsection .020(b): The fact finder may make an award of
punitive damages only if the plaintiff proves by clear and
convincing evidence that the defendants conduct (1) was
outrageous, including acts done with malice or bad motives; or
(2) evidenced reckless indifference to the interest of another
person. (Emphasis added.)
9 See subsection .020(f): Except as provided in (g) and
(h) of this section, an award of punitive damages may not exceed
the greater of (1) three times the amount of compensatory damages
awarded to the plaintiff in the action; or (2) the sum of
$500,000. (Emphasis added.)
10 Reust I, 127 P.3d at 825.
11 Id. at 822 (quoting Anderson v. State ex rel. Cent.
Bering Sea Fishermens Assn (Anderson II), 78 P.3d 710, 717
(Alaska 2003) (Matthews, J., dispositional plurality opinion)).
In Reust I we stated:
[A]llocating half of all punitive damage
awards to the state will reduce the incentive
for plaintiffs to pursue punitive damages
claims. The statute will also encourage
plaintiffs to settle their cases since the
state only shares in punitive damages when an
award is made. These incentives could reduce
both the overall number of punitive damage
claims as well as the number of punitive
damage claims that actually go to trial.
This effect could reasonably be expected to
have a moderating influence on liability
insurance premiums. Further, the incentive
to settle punitive damage claims could reduce
the length and complexity of litigation,
thereby reducing the overall cost of
litigation.
Id. (quoting Anderson II, 78 P.3d at 717) (alteration in
original).
12 Id. (quoting Anderson II, 78 P.3d at 718) (alteration
in original).
13 See id. at 824-26.
14 Id.
15 Id. at 826.
16 Whether a new trial on punitive damages was required is
important because of the purposes of subsection .020(j). The
need for a new trial would mean that the subsection .020(j)
incentives to settle without a trial could still meaningfully
operate and potentially achieve significant savings for the
parties and the court system. But as no new trial was required,
the incentives could no longer operate.
17 Reust also argues that awarding a share of punitive
damages to the State is an unconstitutional taking of his
property, in violation of the takings clauses of the federal and
state constitutions, and also violates his due process rights
secured under the federal and state constitutions. Both these
claims have already been decided in Reust I. No comprehensible
new claims based on the facts following remand have been
asserted.
18 171 P.3d 41(Alaska 2007).
19 Id. at 70.
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