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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Anchorage Chrysler Center, Inc. v. DaimlerChrysler Motors Corporation (12/11/2009) sp-6438
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 CHRYSLER | ) |
| CENTER, INC., | ) |
| ) Supreme Court No. S- 12702 | |
| Appellant, | ) |
| ) Superior Court No. | |
| v. | ) 3AN-99-9780 CI |
| ) | |
| DAIMLERCHRYSLER MOTORS | ) |
| CORPORATION, | ) O P I N I O N |
| ) | |
| Appellee. | ) No. 6438 - December 11, 2009 |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, William F. Morse, Judge.
Appearances: Randall G. Simpson and Matthew
Singer, Jermain Dunnagan & Owens, P.C.,
Anchorage, for Appellant. William D. Falsey
and Jeffrey M. Feldman, Feldman Orlansky &
Sanders, Anchorage, and Mark T. Clouatre,
Wheeler Trigg Kennedy LLC, Denver, Colorado,
for Appellee.
Before: Matthews, Eastaugh, Carpeneti, and
Winfree, Justices. [Fabe, Chief Justice, not
participating.]
CARPENETI, Justice.
I. INTRODUCTION
I. An automobile dealer brought an action against an
automobile manufacturer, alleging breach of contract, fraudulent
misrepresentation, and breach of the covenant of good faith and
fair dealing, and seeking a declaratory judgment and damages.
The superior court entered judgment dismissing all claims. On
appeal, we remanded to the superior court to make additional
findings and conclusions. On remand, the superior court again
entered judgment in favor of the defendant on all claims. The
plaintiff automobile dealer now appeals the superior courts
decision on remand. We affirm the superior courts decision on
the breach of contract claim, but reverse on the claim for breach
of the covenant of good faith and fair dealing and the claim of
fraudulent misrepresentation. Accordingly, we remand to the
superior court for an award of nominal damages, and to consider
whether punitive damages are appropriate for the tort of
fraudulent misrepresentation. We also vacate the award of
attorneys fees and remand for proceedings to determine prevailing
party status, and to reconsider attorneys fees in light of the
foregoing.
II. FACTS AND PROCEEDINGS
A. Facts
This is an appeal of a superior court decision on a
matter that we remanded to the superior court in Anchorage
Chrysler Center, Inc. v. DaimlerChrysler Corp. (Anchorage
Chrysler Center I).1 We laid out the underlying facts of the
case in Anchorage Chrysler Center I:2
During the period relevant to this
dispute, plaintiff Anchorage Chrysler Center
(ACC) operated a dealership selling Chrysler,
Plymouth, and Dodge vehicles, all of which
were distributed to ACC by defendant
DaimlerChrysler Motors Company, LLC (DCMC)
(formerly known as DaimlerChrysler Motors
Corporation).[3] ACC sold the vehicles out
of two adjacent buildings on Fifth Avenue:
Plymouths and Chryslers were sold out of one
building, and Dodges out of the other. ACC
operated the dealership pursuant to Sales and
Service Agreements between ACC and DCMC.
These sales and service agreements gave
DCMC the right to authorize other dealers to
sell the same cars in the same locality as
DCMC determines to be appropriate. The other
DCMC dealer in Anchorage was Johnson Jeep.
The only DCMC models Johnson Jeep carried
were Jeep and Eagle.
In the mid-1990s, DCMC developed a
merchandise strategy it called Project 2000.
Dealers were encouraged to sell Dodge
vehicles in facilities that were separate
from the facilities used to sell Chrysler,
Plymouth, Jeep, and Eagle vehicles. DCMC,
ACC, and Johnson Jeep entered into
discussions about how to achieve Project
2000s goal of the same dealer selling the
Chrysler, Plymouth, Jeep, and Eagle lines.
DCMC and ACC began to negotiate what would
eventually become a letter agreement between
ACC and DCMC under which ACC would not object
to Johnson Jeeps selling Chryslers and
Plymouths. As part of this letter agreement,
DCMC required ACC to rearrange its showrooms
so that Dodges would be sold in what had been
the Chrysler/Plymouth showroom, with the
other lines (including a new Jeep line)
moving to the former Dodge showroom. As part
of the deal DCMC would also agree to
authorize ACC to open a Dodge dealership in
Wasilla.
Getting this letter agreement signed
involved a long period of negotiation,
extending over several years and involving
some false starts. One source of contention
was the Wasilla part of the deal, which
ultimately took the form of a letter of
intent that DCMC was required to provide as
one of its obligations under the letter
agreement. Another concern ACC had (though
the degree to which this concern was
reflected in the parties deal is disputed on
this appeal) was whether DCMC would establish
another Dodge dealership in Anchorage to
compete against ACCs lucrative Dodge
franchise. In March 1999, as the
negotiations began to enter the home stretch,
DCMCs in-house lawyer David King sent an
email to ACCs lawyer, attaching a rough draft
of a Wasilla letter of intent. Under this
draft of the letter of intent, ACC could get
a dealership in Wasilla if it began
constructing the dealership over time periods
to be determined (i.e., the draft had blanks
for all the milestones). This letter of
intent draft also addressed the issue of
other Dodge stores in Alaska, by obligating
ACC not to protest if DCMC established
another dealer selling the same lines as ACC.
The cover memo by DCMCs lawyer explained to
ACCs lawyer that any disagreement over this
language should be resolved as a result of
the understandings already reached. My
clients have not informed me of any plans for
additional dealerships in Alaska. Later,
after DCMC had announced that it would open
another Dodge dealership in south Anchorage,
this statement became one basis of ACCs claim
that DCMC had promised or represented not to
open another Dodge store.
ACC responded by proposing revised
language for the letter agreement. The
letter agreement proposed by ACC deleted all
references to DCMCs providing a letter of
intent and required ACC to commit to a new
Wasilla dealership within five years.1 ACC
also proposed new language that would commit
the parties to the proposition that the
Project 2000 agreements between ACC, DCMC,
and Johnson Jeep
1 This commitment by ACC was initially
made subject to viable economic
circumstances, although a few weeks later ACC
agreed to drop this particular condition.
does not include the Dodge franchise
language apparently intended to insure that
Johnson would not get Dodge. On May 21, 1999,
DCMC responded with a letter from Carl Fleck,
DCMCs regional manager. DCMC said it was
unnecessary to add language to the agreement
precluding DCMC from giving Johnson Jeep a
Dodge dealership: As to awarding a Dodge
Sales and Service agreement to Johnson Jeep,
I can confirm that DaimlerChrysler has no
plan to add Dodge to this dealership. This
would become another statement used to
support ACCs claim that DCMC had at least
implicitly promised or represented not to
start a new Dodge dealership in Anchorage.
The May 21 DCMC letter also seemed to
reject ACCs Wasilla proposal. Fleck enclosed
another draft of the letter of intent, which
was not signed by DCMC but looked ready to be
signed by both parties. Under this version
of the letter of intent, DCMC promised to
award ACC a Wasilla dealership for Dodge and
all other DCMC vehicles, provided ACC met
certain milestones. Under this draft of the
letter of intent, the first milestone
proposal of a suitable site for the
dealership needed to be met by June 2002 (a
little more than three years) and ACC had to
finish the dealership by July 2004 (a little
more than five years).2 One of the issues in
this appeal is whether this May 21 letter of
intent was in form and substance the letter
of intent contemplated by the letter
agreement that was concluded a few days
later.
On May 28, 1999, ACC and DCMC had a
conference call, attended by Fleck on DCMCs
side and by several managers on ACCs side.
What happened on the call was disputed at
trial. First, ACC asked about the letter
agreements requirement that ACC establish
separate and complete showrooms for Dodge on
the one hand and for Chrysler/Plymouth/Jeep
on the other. According to the superior
courts findings, Fleck told ACC that because
ACC
2 Unlike DCMCs prior draft, this letter of
intent did not contain any language that
purported to preclude ACC from opposing DCMCs
establishment of competing dealers.
already had two showrooms and combined
service and parts
facilities and staff, the changes needed
would be minor. ACC also asked Fleck about
Dodge. What was said on this point was hotly
disputed at trial. ACC witnesses testified
that Fleck responded by promising not to put
a new Dodge dealership of any kind in
Anchorage. But the superior court found
(based on Flecks testimony) that Fleck made
only a brief reference to Dodge and only in
the context of what [Johnson Jeep] was to get
(or rather to confirm what [Johnson Jeep]
would not get).
The letter agreement giving rise to this
litigation is dated May 26, 1999. ACC signed
the agreement on May 28, 1999, after the
parties conference call; DCMC signed it on
June 1, 1999.3 The letter contains three
bullet points. The first bullet bestows a
Jeep dealership on ACC, contingent on ACCs
establishment of separate and complete
facilities. The second bullet says that ACC
will not object to DCMCs giving Johnson Jeep
the Chrysler and Plymouth franchises (no
mention is made of Dodge). The third bullet
says DCMC will provide ACC with its standard
five year Letter of Intent. Altogether, the
three bullets read as follows:
Subject to [ACCs] meeting [DCMCs]
qualification requirements, DCMC will enter
into its standard Jeep Sales and Service
Agreements with ACC. As a part of meeting
DCMCs qualification requirements ACC will
establish a complete Chrysler, Plymouth, Jeep
(CPJ) operation in ACCs current Dodge
dealership facilities. As a result, ACC will
establish a separate Dodge dealership
operation with a
3 According to the terms of the letter
agreement, it became effective on June 1,
1999, the date that it was signed by an
authorized representative of DCMC. The
superior court chose to refer to the letter
agreement as the May 28 letter agreement,
based on the date ACC signed the agreement.
For purposes of clarity, we will continue to
refer to the agreement as the May 28 letter
agreement.
separate dealer code in ACCs current Chrysler
Plymouth dealership facility. ACC may choose
to set up a separate legal entity under which
the Dodge dealership will operate or ACC may
operate each of the two dealerships under
ACCs existing corporate entity with separate
d/b/a names for the CPJ and Dodge operations.
ACC understands and agrees that subject
to Johnson Jeep meeting DCMCs qualification
requirements, DCMC will enter into its
standard Chrysler and Plymouth Sales and
Service Agreements with Johnson Jeep at
Johnson Jeeps current Jeep location. ACC
agrees to not protest or oppose this
establishment in any administrative, court or
other proceeding.
DCMC will provide You and ACC with its
standard five year Letter of Intent giving
You and ACC the right to qualify and be
approved as a Dodge, Chrysler, Plymouth and
Jeep dealership in the Wasilla, Alaska Sales
Locality. Such a Letter of Intent will be
conditioned upon You and ACC meeting DCMCs
standard dealership qualifications applicable
to the Wasilla, Alaska Sales Locality,
including the requirement of adequate
facilities. The Letter of Intent will be
drafted to become effective as of the date of
the standard Jeep Sales and Service Agreement
referenced above.
Soon after signing, the parties
disagreed about what changes ACC had to make
to its showrooms to make each complete and
separate under the agreement. DCMC wanted
separate managers, separate service areas,
separate parts counters, separate sales
staff, separate financial statements, and
separate dealer codes. ACC understood the
changeover merely to involve using separate
dealer codes, swapping signs, and making
other minor modifications.
In September 1999, without making any
attempt to create separate and complete
facilities, ACC filed its complaint in this
action. DCMC had never sent any Jeeps to
ACC, and never (after May 21) sent ACC
another letter of intent for a Wasilla
dealership. The complaint alleged, among
other things: (1) that, by insisting on a
significant transformation of ACC as a
precondition to receiving Jeeps, DCMC
breached the May 28 agreement and violated
the duty of good faith and fair dealing; (2)
that DCMC misrepresented its intention not to
establish a dealer in south Anchorage; (3)
that DCMC breached its promise to give ACC
five years to establish a dealership in
Wasilla; and (4) that a new dealership would
violate the agreement and the covenant of
good faith and fair dealing. The complaint
sought declaratory relief, injunctive relief,
and compensatory and punitive damages. Less
than two months after the complaint was
filed, DCMC formally approved a plan to open
a new Dodge store in south Anchorage,
although not at Johnson Jeep.
The matter eventually came to a bench
trial before Superior Court Judge William F.
Morse. He issued findings of facts and
conclusions of law rejecting ACCs claims
(though one issue on this appeal is whether
the opinion actually addresses certain
claims), and on this basis entered a judgment
dismissing all claims against DCMC. The
superior courts rulings will be discussed in
detail below, but can be summarized briefly.
Rejecting ACCs claim that DCMC breached the
contract by failing to provide Jeeps, the
court held that the contract required ACC to
make at least some changes to its facilities,
and that without attempting to make such
changes ACC could not complain of any breach
by DCMC. On the issue of the new Dodge
dealership in south Anchorage, the court
rejected ACCs contractual claims after
finding that DCMC never promised to refrain
from establishing an entirely new dealership.
The court also rejected ACCs claim that DCMC
misrepresented its intentions to open a new
Dodge dealership, finding that ACC was not
justified in relying on the hedged statements
made by DCMC, that ACC did not actually rely
on these statements, and that the statements
were technically true. As to the Wasilla
letter of intent, the court found that DCMC,
having sent a letter of intent on May 21 (a
few days before the letter agreement was
signed), was not required to send another
letter of intent under the letter agreement,
at least when ACC had never requested that
DCMC send such a new letter of intent.
After determining that DCMC was the prevailing party, the
superior court awarded DCMC twenty percent of the $1,783,513 in
attorneys fees that DCMC incurred, for a total award of
$356,702.60.
B. Proceedings
In Anchorage Chrysler Center I, ACC appealed the
superior court decision on four grounds. First, ACC argued that
the superior court erred by not determining what alterations to
ACCs facilities were required by the May 28 letter as
preconditions for DCMC shipping Jeeps.4 Second, ACC argued that
the superior court erred in finding that the May 28 letter did
not include a promise by DCMC to not open a new Dodge franchise
in Anchorage and in finding that additional statements by DCMC
regarding a new Dodge dealership in Anchorage were not
misrepresentations.5 Third, ACC argued that the superior court
erred in finding that the letter of intent contemplated in the
May 28 letter was the May 21 letter of intent.6 Fourth, ACC
argued that the superior court erred by failing to discuss ACCs
claim for breach of the covenant of good faith and fair dealing.7
We considered the four claims and remanded to the
superior court to make specific additional findings. First, we
instructed the superior court to determine whether the criteria
for issuing a declaratory judgment are satisfied and, if so,
decide whether DCMCs demands concerning creating separate
dealership operations were in accordance with the May 28
agreement.8 Second, we instructed the superior court to
determine whether DCMCs alleged oral statements . . . were a
fraud inducing ACC to enter into the May 28 letter agreement with
particular attention to whether statements that were technically
true could nevertheless be considered fraudulent
misrepresentation, and to make findings under Section 529 of the
Restatement (Second) of Torts.9 Third, we instructed the
superior court to make additional findings regarding the parties
understandings of the letter of intent contemplated in the May 28
agreement, including whether ACC implicitly waived its right to
receive the letter of intent.10 Fourth, and finally, we
instructed the superior court to address the claim that DCMCs
conduct violated the covenant of good faith and fair dealing.11
On remand, the trial court addressed each of the four
issues. First, the superior court found that the criteria for
issuing a declaratory judgment were satisfied because the parties
discussions about basic principles and requirements were
sufficiently detailed to allow the court to ascertain the parties
respective rights and duties. The superior court additionally
concluded that DCMC did not breach the agreement because ACC had
not taken the minimum steps required to satisfy the condition
precedent and trigger DCMCs obligation to provide ACC with Jeeps.
Second, on the issue of fraud, the superior court found that
statements by DCMCs representative Fleck, by letter and via
conference call, satisfied four of the five elements required to
prove a claim of fraudulent misrepresentation. But, because it
found that ACC did not show any loss, the superior court
concluded that ACC did not satisfy the fifth element and,
accordingly, that it had not proved its claim. Third, the
superior court found that the standard five year letter of intent
referenced in the May 28 letter was the letter of intent that
Fleck had sent to ACC on May 21. The superior court also found
that ACC waived its right to negotiate revisions to the May 21
letter of intent, and that this waiver, combined with ACCs
failure to sign the May 21 letter of intent, was a breach of the
May 28 agreement. Fourth, the superior court briefly considered
each of the three bases offered by ACC as support for its claim,
and concluded that DCMC had not violated the covenant of good
faith and fair dealing.
In the end, the superior court entered final judgment
against ACC and in favor of DCMC on all claims and dismissed all
of ACCs claims with prejudice. ACC appeals the superior courts
decision on remand.
III. STANDARD OF REVIEW
Issues of contract interpretation generally present
questions of law which we review de novo.12 When the superior
court relies on extrinsic testimonial evidence to provide a
factual basis for its interpretation of a contract, we apply the
clearly erroneous standard in reviewing the courts underlying
findings of fact.13 We review findings of fact by the superior
court on issues of misrepresentation under the clearly erroneous
standard.14
IV. DISCUSSION
A. The Superior Court Did Not Err in Declining To Find that
ACCs Non-Performance Was Excused by DCMCs Anticipatory Breach.
ACC argues that although the superior court complied
with our instructions on remand and issued a declaratory judgment
that identified the facility changes that were required by the
May 28 agreement, the superior court erred by not additionally
finding that DCMCs demands for additional facility changes were
an anticipatory breach that excused ACCs performance. ACC claims
that the superior court erred in finding that ACC breached a pre-
condition of the May 28 agreement by not proceeding with its
version of the required facility changes. ACC also asserts that
the superior court erred in failing to recognize that ACCs duty
to perform the new facility changes should have been excused as a
matter of law by the unilateral and unreasonable demands of DCMC.
According to ACC, the superior court should have held that DCMCs
unreasonable and unilateral demands constitute a repudiation or
anticipatory breach of contract and that such anticipatory breach
gives rise to a claim for damages for total breach and discharged
ACCs remaining duties to render performance.
DCMC responds that ACCs anticipatory breach argument is
unavailing because (1) it was raised for the first time on
appeal, (2) the superior court found that DCMC never communicated
a repudiation of the contract, (3) any anticipatory breach
alleged by ACC could not have justified ACCs non-performance, (4)
DCMCs actions nullified any earlier repudiation, and (5) any duty
by DCMC to pay damages for an anticipatory breach was discharged
when ACC breached and indicated that it would never perform its
obligations.
1. The anticipatory breach issue is properly before
this court.
DCMC argues that we should not consider ACCs
anticipatory breach arguments because ACC cannot properly advance
a theory of anticipatory breach for the first time in the opening
brief of a second appeal, eight years after filing its complaint.
ACC responds that, although it has honed its arguments over eight
years of litigation, there is nothing new about the anticipatory
breach argument.
We have held that, in general, a party may not present
new issues or advance new theories to secure a reversal of a
lower court decision.15 We have adopted a liberal approach
towards determining whether an issue or theory of a case was
raised in a lower court proceeding, however, and will consider
new arguments on appeal if they are closely related to the trial
court arguments and could have been gleaned from [the] pleadings.16
Key words or phrases do not need to appear in the pleadings in
order for us to find that an argument was raised prior to the
appeal.17
Here, although ACC did not use the exact terms
anticipatory breach or repudiation prior to this appeal, ACC
established the basis for its present argument by alleging in
its complaint and in its first appeal of the superior courts
finding that it was DCMC that first breached the agreement.
Additionally, the factual findings made by the superior court in
the original hearing and on remand, particularly the findings
that led to the declaratory judgment on the terms of the May 28
agreement, provide an adequate factual basis for us to determine
whether DCMCs additional demands constitute an anticipatory
breach. Because ACC has consistently argued, beginning with its
complaint, that DCMC was the first to breach the May 28 agreement
and that a declaratory judgment is necessary to establish this
breach, and because the superior court has issued a declaratory
judgment and made other findings regarding the agreement and the
parties subsequent actions, we conclude that the anticipatory
breach argument is properly before this court.
2. DCMCs additional demands did not constitute an
anticipatory breach of the May 28 agreement.
We instructed the superior court, on remand, to
determine whether the criteria for issuing a declaratory judgment
are satisfied and, if so, decide whether DCMCs demands concerning
creating separate dealership operations were in accordance with
the May 28 agreement.18 On remand, the superior court concluded
that the criteria for issuing a declaratory judgment were
satisfied because [i]t will be useful for the parties to have
this dispute resolved so that they may understand how they came
to such a misunderstanding and avoid similar controversy in their
future dealings. The court then found that, although [t]he
parties never finalized a detailed description of what ACC needed
to do to its facilities and operations, the parties discussions
about basic principles and what would be required were detailed
enough to permit the Court to declare what minimum steps ACC
needed to take to meet the condition precedent that would trigger
DCMCs obligation to deliver Jeeps to ACC. These steps involved
changing signage, utilizing separate dealer codes, and upgrading
physical facilities and changing staffing to allow each facility
to provide service work and parts sales. The superior court also
explicitly laid out the actions that ACC was not required to
take, finding that ACC would not have to increase the square
footage of either of its buildings . . . would not have to have a
duplicate office staff for the smaller building . . . . [and]
would not have to have a general manager, a sales manager, a
service manager, or parts manager for the smaller building. The
superior court ultimately concluded that if ACC had constructed
the changes to the facilities and modified its operation as
identified above, then ACC would have . . . triggered DCMCs
obligation to provide ACC with Jeeps, even if DCMC was not fully
satisfied with the modifications. The superior court
additionally found that both sides became more demanding after 28
May.
ACC argues that although the superior court made
correct factual findings, its conclusions of law were in error.
ACC claims that its duty to make the modifications to its
facilities was excused as a matter of law by DCMCs unilateral and
unreasonable demands. This argument is based on the premises
that DCMCs unreasonable and unilateral demands constitute a
repudiation or anticipatory breach of contract, and that such
anticipatory breach gives rise to a claim for damages for total
breach and discharged ACCs remaining duties to render
performance.
DCMC responds to the first premise by arguing that the
superior court correctly concluded that DCMC did not announce a
definite and unconditional intent to repudiate the May 28
agreement. DCMC responds to the second premise by arguing that
any anticipatory breach on its part could not have excused ACCs
non-performance. DCMC also argues that any anticipatory
repudiation was nullified by the parties subsequent
communications, and cannot provide the basis for a claim for
damages because the superior court correctly concluded that ACC
would never have performed.
We have looked to the Restatement (Second) of Contracts
to provide guidance on the requirements for anticipatory
repudiation.19 According to the Restatement,
[a] repudiation is
(a) a statement by the obligor to the obligee
indicating that the obligor will commit a
breach that would of itself give the obligee
a claim for damages for total breach . . . ,
or
(b) a voluntary affirmative act which renders
the obligor unable or apparently unable to
perform without such a breach.[20]
When the alleged repudiation takes the form of additional demands
or requirements from one party, we have stated that
[t]o be a repudiation, a partys language must
be sufficiently positive to be reasonably
interpreted to mean that the party will not
or cannot perform. A repudiation could also
involve language that clearly manifests an
intention not to perform except on conditions
which go beyond the contract[.] Similarly,
to be an anticipatory breach based on a
request for additional conditions, the
request must be coupled with an absolute
refusal to perform unless the request is
granted.[21]
In order to determine that the superior court erred in finding
that DCMC did not repudiate the agreement, therefore, we must
find that DCMC demonstrated a refusal to perform unless the
additional requirements it communicated after the May 28 letter
agreement were met.
To support its assertion that DCMCs inconsistent and
onerous demands in the summer of 1999 qualify as an anticipatory
breach or renunciation of the contract, ACC points to several
instances where DCMC allegedly made additional, unreasonable
demands. First, ACC points to comments made at a meeting in July
1999, several weeks after the parties signed the May 28
agreement, when DCMC representatives traveled to Anchorage to
discuss the facility requirements. ACC claims that at that
meeting DCMC insisted that it would not give the Jeep line to ACC
unless ACC agreed to create two exclusive dealerships at its
current location. The trial testimony that ACC cites as support
for this assertion, however, includes the testimony of Carl
Fleck, DCMCs regional representative, who acknowledged that
exclusivity was discussed at the meeting but further claimed that
exclusivity was offered only as an opening negotiating position
and that DCMCs representatives also indicated a willingness to
settle for less than that. Fleck characterized the discussion
as: We request that you have this but this is what I will settle
for. Fleck described the course of the discussion by stating
[w]e started off talking about what the actual requirements were
. . . . After that we talked about okay, what can we do to make
this work and what . . . would you . . . kind of settle for.
ACC also points to several DCMC documents as support
for the assertion that DCMC demanded exclusive facilities.
Although these documents do reference DCMCs continued desire for
exclusivity and ACCs resistance, none of these documents
contradict Flecks testimony that DCMC would ultimately be willing
to be flexible on the issue of exclusivity. The documents
referenced by ACC include: a facility guide that DCMC faxed to
ACC on August 3, 1999 that lists the square footage for the Dodge
exclusive and CPJ exclusive facilities; an internal DCMC
memorandum that preceded the July 1999 meeting and that
characterized the meeting as an attempt to make a trip to
Anchorage to iron out the details that [ACC] is having difficulty
with; a memorandum that characterizes ACCs position as objecting
to the exclusivity requirements; and a memorandum that describes
a letter sent to ACC asking for its firm commitment to provide
exclusive facilities by September 17, 1999. None of these
internal documents may reasonably be interpreted to be a
statement that DCMC would not perform under the contract unless
ACC agreed to exclusivity.
Therefore, the record does not contain support for ACCs
assertion that DCMC repudiated the agreement when it made
subsequent requests for exclusive facilities. DCMC did not make
any statements that, reasonably interpreted, said it would not
perform unless ACC created exclusive facilities, and the evidence
contains testimony that suggests that the request for exclusivity
was an opening bargaining position and that DCMC made clear that
it was willing to negotiate. Because the record does not contain
any evidence that DCMC demonstrated a refusal to perform except
on conditions which go beyond the contract,22 it was not clear
error for the superior court to conclude that DCMC did not
repudiate the agreement.
B. It Was Error To Conclude that ACC Failed To Establish
the Loss Element of Its Fraudulent Misrepresentation
Claim.
We determined in the first appeal that the superior
court erred as a matter of law in the original hearing by not
making findings of fact appropriate to the legal test for
fraudulent misrepresentation articulated in the Restatement
(Second) of Torts.23 Specifically, we were concerned that the
superior court did not appear to appreciate that a statement can
be literally true and yet still be an actionable
misrepresentation.24 Accordingly, we remanded to the superior
court for further consideration of whether DCMCs statements
regarding its intention not to place new Dodge dealerships in
Anchorage were a fraud inducing ACC to enter into the May 28
letter agreement.25 There were two statements by DCMC that the
superior court considered on remand: (1) [a] statement in the May
21, 1999 letter to ACC by DCMC manager Carl Fleck: As to awarding
a Dodge Sales and Service agreement to Johnson Jeep, I can
confirm that DaimlerChrysler has no plan to add Dodge to the
[Johnson Jeep] dealership ; and (2) [a] statement to ACC on a
conference call by the same DCMC manager, the day ACC signed the
agreement, allegedly to the effect that DCMC would not establish
a Dodge dealership in south Anchorage.26
We have identified the elements of intentional
misrepresentation as (1) a misrepresentation of fact or
intention, (2) made fraudulently (i.e., with scienter), (3) for
the purpose of inducing another to act in reliance, (4) with
justifiable reliance by the recipient, (5) causing loss.27
On remand, the superior court found that the first four
elements of fraudulent misrepresentation were met, and that [i]f
in March or May [DCMC] had told ACC of the imminence of the
second Dodge dealer, [ACC] would not have signed the 28 May
letter. The superior court also found, however, that ACC did not
suffer any loss as a result of DCMCs fraudulent misrepresentation
because [t]he only affirmative steps that ACC took were to change
the logos on the floors of the two showrooms and to consult
architects. The superior court supported this finding by
pointing to the facts that there was no testimony about the cost
of the switch and no reason to believe that ACC did not receive
some benefit from the appearance of the new logos and that
[t]here was no evidence that the architects were hired or
performed any work. Accordingly, because it found that ACC
failed to prove the necessary fifth element for fraudulent
misrepresentation, the superior court found for DCMC.
ACC now argues that although the superior court
correctly found on remand that DCMC made statements that were
fraudulent misrepresentations and that ACC justifiably relied on
these misrepresentations, the superior court erred by finding
that ACC did not suffer any loss and by concluding that ACC
therefore failed to prove its claim for fraudulent
misrepresentation. ACC contends that the superior court erred by
considering only reliance damages and not consequential damages
in determining whether ACC suffered any losses. In the
alternative, ACC argues that it did suffer reliance damages and
that, as a result, the superior court erred by not awarding at
least nominal damages.
DCMC responds that the superior court properly
considered all categories of loss that ACC could have suffered
and correctly found that ACC did not suffer any loss.
We conclude that the superior court properly rejected
ACCs claim for consequential damages, but should have awarded
nominal damages for losses ACC incurred in reliance on DCMCs
misrepresentations.
1. The superior court did not clearly err in finding
that ACC suffered no consequential losses from
DCMCs fraudulent misrepresentations.
ACC argues that the superior court should have
considered those other consequential damages which ACC would not
have suffered but for DCMCs fraud. (Emphasis in original.)
Specifically, ACC argues that [b]ut for DCMCs fraud, ACC would
still be the only Chrysler dealer in Anchorage and that therefore
the Project 2000 deal cost ACC a significant loss of Chrysler
sales. (Emphasis in original.)
In general, when reviewing the assessment of damages in
tort cases, we apply the rule that the injured party is entitled
to be placed as nearly as possible in the position he would have
occupied had it not been for the tortious conduct.28 These
damages can include those costs proximately resulting from or in
consequence of the defendants conduct.29 A plaintiff in a tort
action for fraudulent misrepresentation, therefore, may recover
damages incurred for losses suffered both in reliance on, and in
consequence of, the defendants tortious action. ACC argues that
the superior court violated this principle by basing its
conclusions only on the losses ACC incurred in reliance on DCMCs
fraudulent statements, and not on additional losses suffered in
consequence of DCMCs statements. DCMC responds that the superior
court did in fact consider ACCs consequential losses, such as the
potential loss of sales caused by increased competition, but
found that ACC would have experienced those losses regardless of
whether DCMC had made the fraudulent statements and whether or
not ACC had entered into the agreement.
It appears that the superior court did consider the
losses that ACC alleges it experienced as a result of increased
competition from the expansion of Johnson Jeep via Project 2000
to include Chrysler sales, as well as the addition of a new Dodge
dealership to the Anchorage region.30 The superior court found
that any lost sales that ACC suffered as a result of this
increased competition would have occurred if Fleck had revealed
DCMCs intention to open a second Dodge [dealership] before 28 May
and [ACC] had broken off the Project 2000 talks because [Johnson
Jeep] would have gotten its expanded lines and DCMC would have
opened the second Dodge dealership. Thus, the superior court
implied, ACCs agreement to participate in Project 2000 as a
result of DCMCs fraudulent misrepresentations did not increase
the chances that ACC would experience a loss of sales.
ACC disputes this finding by arguing, based on the
testimony of DCMCs regional manager Carl Fleck, that there would
not have been a Project 2000 in Anchorage without ACCs consent.
The corollary of this argument is that DCMC could not have added
additional product lines to Johnson Jeep or added a new Dodge
dealership without ACCs agreement to participate in Project 2000.
We disagree.
ACCs sales and service agreements with DCMC for sale of
the Chrysler, Plymouth, and Dodge product lines all contain a
provision that specifies that ACCs right to the product lines is
non-exclusive and that ACCs designated sales locality may be
shared with other [DCMC] dealers as [DCMC] determines to be
appropriate. Therefore, although DCMC appears to have initially
sought the approval of all local dealers before implementing
Project 2000 in Anchorage, the franchise agreements did not
require it to do so.
We addressed the issue of ACCs sales and service
agreements with DCMC and their impact on ACCs misrepresentation
claims in our opinion in the original appeal.31 At that time we
considered DCMCs argument that the existence of these sales and
service agreements made any oral misrepresentations about new
dealerships . . . irrelevant, but rejected this argument because
an oral statement that would be unenforceable as a promise under
the terms of Contract A may yet be a tortious misstatement if it
induces the recipient of the statement to enter into Contract B.32
We now conclude that the facts preclude ACC from establishing a
claim for consequential damages under that line of reasoning as
well.
None of the agreements that DCMC entered into with the
Anchorage dealers in the course of implementing Project 2000
created a legal right on the part of any one dealer to object to
an individual agreement between DCMC and any of the other
dealers. The record shows that after ACC frustrated an initial
attempt by DCMC to get the Anchorage dealers to participate in
Project 2000 in 1997, DCMC revised its internal policy so that
Johnson Jeeps participation in Project 2000 would not be
dependent on ACCs consent. Johnson Jeeps eventual agreement with
DCMC in January 1999 did not, in fact, require ACCs consent, and
Johnson Jeep and DCMC continued to honor that agreement even
after DCMCs separate agreement with ACC unraveled.
Therefore, not only did the sales and service agreement
between ACC and DCMC preserve DCMCs right to open new franchises
and authorize the sale of additional product lines within the
Anchorage region, but the eventual Project 2000 letter agreement
between DCMC and Johnson Jeep did not contain any provision
making that deal contingent on ACCs consent or approval.
Accordingly, ACC never had any legal right to protest DCMCs
agreement to add a Chrysler product line to Johnson Jeep. As a
result, any loss of Chrysler sales that ACC suffered due to
competition from Johnson Jeep would have occurred whether or not
ACC had entered into a Project 2000 agreement with DCMC. Because
ACC never had a legal right to object to the addition of the
Chrysler product line to Johnson Jeep whether as part of a
Project 2000 agreement or not ACC cannot now claim that any
sales loss it suffered as a result of this increased competition
was a consequence of DCMCs fraud or ACCs resulting participation
in Project 2000. The superior court was correct, therefore, in
finding that any losses ACC incurred from competition with other
dealerships in the region would have occurred whether or not ACC
had entered into the Project 2000 agreement.
2. The superior court erred in failing to award
nominal damages after ACC showed it incurred
losses in reliance on DCMCs fraudulent
misrepresentations.
ACC argues, in the alternative, that the superior court
should have awarded it at least nominal damages because ACC
established that it did suffer some losses in reliance on DCMCs
fraudulent misrepresentations. ACC contends that it suffered
losses in the form of both the cost of switching the floor logos
and the harm from a weakening of ACCs bargaining position. DCMC
responds that ACCs argument for nominal damages is meritless
because it is raised for the first time on appeal, because the
superior court did not commit clear error in finding that ACC
failed to prove that it was harmed, and because the superior
court was not obligated to award nominal damages. DCMC also
argues that ACC is not entitled to remand because the superior
court did not abuse its discretion in determining that DCMC was
the prevailing party and ACC was not entitled to punitive
damages.
As discussed in Part IV.A.1. above, we have adopted a
liberal approach towards determining whether an issue or theory
of a case was raised in a lower court proceeding; and we will
consider new arguments on appeal if they are closely related to
the trial court arguments and could have been gleaned from [the]
pleadings.33 ACCs fifth claim for relief in its complaint
includes the assertion that [ACC] reasonably relied upon [DCMCs]
misrepresentations and omissions in agreeing to waive its rights
to protest the establishment of a new motor vehicle dealership in
[ACCs] relevant market area, and the prayer for relief included
requests for an award of damages in an amount to be determined at
the time of trial, but in excess of $75,000.00 and such other and
further relief as the court may deem just and appropriate.
Because ACC raised the issue of DCMCs misrepresentations and
requested unspecified damages and additional relief in its
complaint, ACCs current request for nominal damages is properly
before this court.
Whether nominal damages are available to a plaintiff in
a case of fraudulent misrepresentation is a question of first
impression in Alaska. We have recognized that nominal damages
are typically awarded in two situations: (1) as a trifling or
token allowance for a technical invasion of a plaintiffs rights
or a breach of a legal duty when no actual injury is shown, or
(2) as the very different allowance made when actual loss or
injury is shown, but plaintiff has failed to prove the extent and
amount of damages.34 In holding that nominal damages are an
available remedy for false arrest under the first category, we
have recognized that as a matter of law, a plaintiff in a false
arrest case need offer no proof of actual damages because injury
in the sense of monetary loss is not an element of the tort.35 In
contrast, as discussed above, an actual loss is one of the five
required elements for proving a claim of fraudulent
misrepresentation.36 Because a plaintiff in a fraudulent
misrepresentation case must show proof of actual loss, the first
category of nominal damages does not apply in this case.
Under the second category of nominal damages that we
have identified, ACC would have a claim to nominal damages only
if it proved that it did suffer a loss but was not able to
establish the extent or amount of damages. ACC bases its claim
for nominal damages on the costs it incurred in switching the
floor logos and on the loss of bargaining power that it suffered
by relying on DCMCs misrepresentations. In addressing ACCs
claims that it suffered a loss from the costs of switching the
logos, the superior court found that there was no testimony about
the cost of the switch and no reason to believe that ACC did not
receive some benefit from the appearance of the new logos.
However, the lack of testimony on the cost of the switch does not
by itself preclude a claim for nominal damages, since an award of
nominal damages is appropriate where a party incurs a pecuniary
loss of undetermined amount. The superior court additionally
found that the newly painted logos may have conferred a benefit
on ACC sufficient to make up for any loss suffered.
That ACC might have benefitted from its expenditure is
possible, but was not shown. Furthermore, to assume that an
offsetting benefit negates the harm ignores opportunity costs:
ACC might have had another way to expend those funds that would
have benefitted it more.
While the changing of the logos was an actual, if
unquantified loss, we do not agree with ACCs claim that it
suffered a loss from harm to its bargaining position. As is the
case with the alleged loss from switching the logos, ACC does not
point to evidence to establish the extent of the loss it suffered
as a result of diminished bargaining power. In addition, there
is no precedent in Alaska for considering a change in bargaining
position to constitute in itself a loss in a fraud action. ACC
relies on a case from the Illinois Court of Appeals where the
court found that the distortion of the bargaining process [from
the fraud] is itself sufficient to establish damage.37 The
Illinois decision, however, was based on an unusual aspect not
present in the case at hand: [the defendant] allegedly engaged in
a fraudulent scheme to overcome [the plaintiffs] resistance, even
though an honest transaction . . . allegedly might have been more
advantageous to [the defendant].38 The Illinois court concluded
that it was appropriate to broaden the inquiry into damages to
encompass harm to the plaintiffs bargaining position because the
unusual circumstances of the case made it impossible for the
plaintiff to argue the benefit of the bargain as the measure of
damages.39
In the absence of the unusual circumstances at issue in
the Illinois case, ACCs reliance on the Illinois decision is
misplaced. It would not be appropriate to generally broaden the
fifth element of the fraudulent misrepresentation tort by
treating changed bargaining position as, in and of itself, an
actual loss. In virtually any fraudulent misrepresentation case
involving negotiations or a contract, the reliance element will
involve the use of misrepresentation to influence what a party
consents to do or not do. Equating a compromised bargaining
position with actual loss would thus cause the loss and reliance
elements of the tort to collapse into a single element. Every
time a party could show that it acted in reliance on a fraudulent
misrepresentation (the fourth element of the tort), it could
automatically assert the misrepresentation harmed its bargaining
power and caused a loss (the fifth element). The loss in
fraudulent misrepresentation must be a pecuniary loss that is
caused by the plaintiffs reliance on the misrepresentation.
In addition, ACC never enjoyed a favorable bargaining
position in relation to DCMC because, as discussed above, ACC
never had a legal right to oppose the expansion or addition of
competing dealerships in the Anchorage area.40 Therefore, any
harm to ACCs bargaining position would have been unlikely to
change the outcome of any negotiations with DCMC.
ACC further argues that the superior court erred by not
awarding nominal damages so that ACC could vindicate the
injustice of its franchisor committing fraud in the course of its
day-to-day business, and so that ACC could be deemed the
prevailing party for purposes of Civil Rule 82 fees. ACC frames
this as a policy question, asking when a plaintiff proves a case
of fraud and shows that it has acted in reliance on that fraud,
should the trial court at least award nominal damages and declare
the fraud victim the prevailing party? Were we to adopt the
proposed policy, the effect would be to sever the fifth element
currently required to prove a claim of fraudulent
misrepresentation: loss.41 ACC does not offer more than cursory
support for this extraordinary proposition, however. Although
ACC is correct that fraud, including fraudulent
misrepresentation, should be discouraged, ACC has not established
that the existing test for fraudulent misrepresentation is so
flawed that it should be abandoned.
We conclude that it was error to fail to award at least
nominal damages for the expenses ACC incurred in switching its
floor logos. Although the amount of this loss was undetermined,
and likely small, nominal damages should have been awarded. On
remand, the trial court will need to also consider how such an
award affects prevailing party status and attorneys fees, and
will also need to consider whether punitive damages are
appropriate. This will be discussed further in Part IV.E below.
C. DCMC Breached the Covenant of Good Faith and Fair
Dealing When It Made Fraudulent Misrepresentations.
In the original appeal in this case we determined that
the superior court failed to address ACCs three claims for breach
of the covenant of good faith and fair dealing.42 We described
those claims as: (1) DCMCs failure to notify ACC that it intended
to establish a new south Anchorage dealership, (2) its alleged
revocation of the Wasilla letter of intent, and (3) its allegedly
unreasonable demands for changes in ACCs facilities.43
Accordingly, we remanded to the superior court to rule on these
claims and to make the factual findings incident to such a
ruling.44
On remand, the superior court concluded that DCMC did
not violate the covenant of good faith and fair dealing in the
revocation of ACCs ability to open a dealership in Wasilla or its
ability to receive Jeeps. DCMC acted in bad faith in its
nondisclosure of the coming of the second Dodge dealership, but
that misconduct did not cause ACC any damage. The superior court
also found that these claims add little to ACCs other claims, and
that ACCs scant treatment of [these claims] at the trial was an
implicit recognition that they are not much more than
restatements of ACCs main claims.
We have held that [t]he covenant of good faith and fair
dealing is implied in every contract in order to effectuate the
reasonable expectations of the parties to the agreement.45 The
covenant includes subjective and objective elements, both of
which must be satisfied.46 The subjective element prohibits one
party from acting to deprive the other of the benefit of the
contract.47 The objective element requires each party to act in a
manner that a reasonable person would regard as fair. 48
In its current appeal, ACC primarily relies on the
argument that DCMC breached the implied covenant of good faith
and fair dealing when it accelerated its plans to open an
additional Dodge dealership in south Anchorage. ACC first argues
that the superior court failed to make any findings on remand on
the issue of whether DCMC breached the covenant by opening the
second Dodge franchise. In particular, ACC contends that the
superior court did not consider evidence that there was no market
justification for a second Dodge [dealership] in Anchorage and
that in so doing DCMC ignored its own procedures and acted [in a
manner that was] inconsistent with general industry practices and
good faith dealing. ACC alleges that DCMC opened the second
Dodge dealership in South Anchorage out of a desire to retaliate
against ACC for bringing its lawsuit.
ACC is correct that the superior court did not directly
address, in its consideration of the breach of covenant
arguments, the claim that DCMC violated its own procedures and
industry practices when it opened the second Dodge dealership in
south Anchorage. However, the superior court considered the
breach of covenant arguments to be essentially a restatement of
ACCs other claims, and the superior court had engaged, in an
earlier section of its findings of fact and conclusions of law,
in a lengthy discussion of the timeline of events leading up to,
and the justifications for, DCMCs decision to open the second
Dodge dealership. The superior court noted that DCMCs regional
representative had communicated to his superiors a desire for a
second Dodge dealer in south Anchorage in May 1998, and that the
idea of a second Dodge dealership in Anchorage was being
discussed as early as August 1996. The superior court also noted
that Jim Dimond, the DCMC employee in Detroit responsible for
market studies, visited Anchorage in October 1999 and, after
reviewing additional information, requested the opening of a
second Dodge dealer in south Anchorage on 26 October. The
superior court then found that the events after May show that it
was not a difficult process [to secure a second Dodge dealership
in Anchorage] given the growth of competition and population in
South Anchorage, and that had Fleck not decided to delay the
request for a market study of a second Dodge dealership until
after Project 2000 he would likely have gotten the study and it
would likely have approved the dealership months if not years
before October.
These findings by the superior court that the market
conditions in Anchorage justified the addition of a second Dodge
dealership, and that DCMC employees had been considering a second
dealership for years prior to the conflict and litigation with
ACC are inconsistent with ACCs claims that DCMC added the second
Dodge dealership in violation of its own procedures and industry
practice and in retaliation against ACC. Therefore, although the
superior court made these findings in a separate section, the
findings informed its conclusion that DCMCs decision to open a
second Dodge dealership in Anchorage did not violate the covenant
of good faith and fair dealing.
ACC also contends that the superior court erred by not
finding that DCMC breached the covenants of good faith and fair
dealing by revoking the Wasilla letter of intent. ACC fails to
assert any specific arguments as to why DCMCs revocation of the
Wasilla letter of intent in November 1999 violated the covenant
of good faith and fair dealing. In addition, ACC fails to refute
the superior courts findings that DCMC did not act precipitously
in November 1999 or without a long history of conduct that made
it more than reasonable for DCMC to understand that [ACC] was not
going to perform as promised. [ACCs] own decisions, not DCMCs
bad faith nondisclosure caused the cancellation of the Wasilla
deal.
ACC also claims that DCMC breached the covenant of good
faith and fair dealing by making additional unreasonable and
arbitrary demands for exclusive facilities. ACC does not
specifically anchor this claim in either the objective or the
subjective elements of the covenant. Instead, ACC makes only the
blanket allegation that DCMCs unilateral demands were both
objectively and subjectively inconsistent with the covenant of
good faith. The superior court found that DCMC did not make
unreasonable demands for ACCs Anchorage facilities and operations
and, accordingly, concluded that DCMC did not violate the
covenant of good faith and fair dealing in the revocation of ACCs
ability . . . to receive Jeeps. The superior court, therefore,
supported its conclusion with findings based on the evidence in
the record, and ACC failed to offer a specific legal basis for
challenging the superior courts findings or conclusion.
ACCs strongest claim for establishing that DCMC
breached the implied covenant of good faith and fair dealing,
however, is the argument that it raised in the context of its
discussion of the fraudulent misrepresentation issue: that,
during the course of its Project 2000 negotiations with ACC, DCMC
made fraudulent misrepresentations regarding its intentions to
establish additional Dodge product lines in the Anchorage region.
The superior court found that ACC established the first four
elements of fraudulent misrepresentation (a misrepresentation,
scienter, intent to induce reliance, justifiable reliance), but
failed to establish the fifth element (loss).49 While we found
that all five elements were in fact satisfied, the first four
elements alone appear to be sufficient to satisfy both
requirements for ACCs claim of breach of the implied covenant of
good faith and fair dealing. The objective element which
requires each party to act in a manner that a reasonable person
would regard as fair50 is clearly met in this case because no
reasonable person would regard DCMCs willful misrepresentation as
fair. The subjective element which prohibits one party from
acting to deprive the other of the benefit of the contract51 is
also satisfied in this case because ACC believed that it was
contracting for peace in the form of assurances that DCMC would
not open new dealerships or authorize the sale of additional
Dodge product lines in the Anchorage area, but was deprived of
this benefit when DCMC misrepresented its intentions.
DCMC permitted ACC to believe that the parties were
negotiating to determine the distribution of all DCMC product
lines in Anchorage under Project 2000, while all the while DCMC
secretly intended to authorize the sale of at least one
additional Dodge product line. As a result of this fraudulent
misrepresentation, ACC never had the opportunity to play an
actual, meaningful role in determining the distribution of DCMC
product lines in Anchorage. Although the franchise agreements
and Project 2000 agreements technically provided DCMC with the
power to add dealerships and product lines to Anchorage without
requiring the consent of ACC or any other dealers, once DCMC
began negotiating with the dealers it had the responsibility to
behave honestly and straightforwardly.
Although ACC does not directly argue in this appeal
that DCMCs fraudulent misrepresentations themselves represented a
breach of the implied covenant of good faith and fair dealing,
the parties had a full opportunity to present arguments and
evidence on all five elements of fraudulent misrepresentation,
and the superior court made detailed findings in the process of
concluding that DCMCs actions did satisfy the first four
elements. The remaining question before us is the legal
determination of whether those findings and conclusions are
sufficient to satisfy the elements required to establish a claim
for breach of the implied covenant. We conclude that those
elements are satisfied. Accordingly, we hold that DCMC breached
the implied covenant of good faith and fair dealing when it made
fraudulent misrepresentations regarding its intention not to
establish additional Dodge product lines in the Anchorage region.
We have previously indicated that the award of contract
damages is an appropriate remedy in the case of a breach of the
implied covenant of good faith and fair dealing.52 As already
discussed, however, ACC has not established any losses as a
result of DCMCs misconduct that would entitle it to more than
nominal damages. A breach of the implied covenant of good faith
and fair dealing does not by itself justify punitive damages.53
We have already noted, however, that in this case the same
underlying conduct might merit punitive damages because it also
constituted the tort of fraudulent misrepresentation.
D. The Superior Court Did Not Err in Finding that the May
21 Letter of Intent Was the Letter of Intent
Contemplated in the May 28 Agreement.
ACC has consistently argued that DCMC breached the May
28 agreement by failing to provide a letter of intent regarding
ACCs option to establish a dealership in Wasilla.54 In the
original trial the superior court found that DCMC had provided
ACC with a draft letter of intent on May 21, and that although
ACC might have interpreted the May 28 agreement as requiring DCMC
to provide a subsequent letter of intent after the parties signed
the May 28 agreement, ACC never made that demand to DCMC. The
superior court therefore concluded that ACC breached the [May 28,
1999] Agreement when it failed to sign the Letter of Intent and
that [t]hat breach excused DCMCs nonperformance of the portion of
the agreement concerning a dealership in Wasilla. After
reviewing the superior courts conclusion that ACC breached the
May 28 agreement by not signing the May 21 letter of intent, we
remanded for additional findings.55 We gave the superior court
specific directions:
If it determines that both parties understood
that the May 28 agreement referred to the May
21 letter of intent, then it should reject
ACCs breach claim because it seems clear ACC
never would have signed that letter of
intent. If it believes that ACC had in mind a
different letter of intent, and that DCMC was
aware of this, then it should consider
whether ACC implicitly waived its right to
receive this letter of intent by failing to
complain when DCMC did not send a revised
letter of intent. This would require a
consideration of the circumstances
surrounding the contentious period that
followed the signing of the letter agreement
under the standards for an implied waiver
described above. If there was no waiver by
ACC, then DCMCs failure to send a revised
letter of intent would amount to a breach of
its obligation under the letter agreement to
supply a letter of intent. Finally, if the
court concludes that the parties did not have
a meeting of the minds on what constituted
the letter of intent so vaguely identified in
the May 28 letter agreement, then the court
may choose to take briefing on what remedy
should issue.[56]
On remand, the superior court found that [t]he
reasonable inference is that, when both parties signed the 28 May
letter, they understood that the third bullet about the letter of
intent referred to the 21 May letter of intent that already had
been provided by DCMC to [ACC]. The superior court additionally
found, however, that:
DCMC could not reasonably believe that by
signing the 28 May letter that [ACC] had
agreed to all of the terms of the 21 May
[letter of intent]. It did not. DCMC could
only reasonably assume that [ACC] understood
the 28 May letter to mean that the 21 May
[letter of intent] was the starting point for
what would become the final Wasilla [letter
of intent].
Ultimately, the superior court concluded that ACC waived its
right to modify the May 21 letter of intent through its lack of
action, refusal to sign the letter of intent, refusal to offer
alternative proposals to the letter of intent, and failure to
demand any alternative letter of intent or terms in the May 21
letter of intent, and that [t]his waiver and the refusal to sign
the 21 May letter of intent was a breach of the 28 May agreement.
ACC now argues that the May 21 letter of intent was not
the letter of intent contemplated in the May 28 agreement, and
that the superior court erred by finding that it was. ACC also
argues that the superior court erred by finding that ACC had a
duty to request a new letter of intent or to propose or demand
alternative terms to the letter of intent, and by finding that
ACC waived its rights to the letter of intent by failing to meet
this duty. DCMC contends that ACCs arguments are unavailing
because the superior courts finding that both parties understood
that the May 21 letter of intent was the one contemplated by the
May 28 agreement is supported by the evidence. DCMC also asserts
that the superior court correctly concluded that DCMC fulfilled
its obligation by sending ACC a letter of intent (even though
that letter of intent may have required some modification), and
correctly concluded that ACC breached its obligations by not
signing the letter or requesting modifications. We agree with
DCMC.
First, the superior court supported its finding that
both parties understood that the May 21 letter of intent was the
letter of intent contemplated in the May 28 agreement with an
extensive discussion and analysis of the events and interactions
between the parties leading up to the May 28 agreement. This
analysis covered events spanning more than two years, and
included discussion of prior draft letters of intent and
agreements from January 1999 and February 1999. This history of
draft letters of intent and agreements is relevant to the
superior courts ultimate conclusion both because it demonstrates
that the parties had already discussed potential terms for the
letter of intent, and because it establishes that the language in
the May 28 letter agreement referring to the letter of intent in
the future tense was an artifact of previous draft agreements.
Therefore, the superior court did not err by concluding, based on
support in the record and sound analysis, that the May 21 letter
of intent was the letter of intent contemplated by the parties in
the May 28 agreement.
Second, there is no logical inconsistency in the
superior courts finding that the May 21 letter of intent was the
letter of intent contemplated in the May 28 agreement, and that
the May 21 letter of intent contained some terms that may have
required additional negotiation. ACC argues that it was
internally inconsistent for the superior court to find, on the
one hand, that the draft letter of intent of May 21 was the one
contemplated in the parties May 28 agreement, but on the other
[to find that] the May 21 letter was not consistent with the
parties intent and was not final. This argument assumes that
the letter of intent was intended to be final, but nothing in the
May 28 agreement, which referred to the letter of intent only as
DCMCs standard five year Letter of Intent, suggested that this
was to be a final letter of intent. It is reasonable to assume
that a boilerplate agreement would require some additional
negotiation and refinement, and therefore that the standard five
year Letter of Intent contemplated by the May 28 agreement was
not intended as a final letter of intent.
It is important to note that this conclusion is
consistent with the first scenario we offered in our instructions
to the superior court on remand that both parties understood
that the May 28 agreement referred to the May 21 letter of intent
and distinct from the second scenario we offered that ACC had in
mind a different letter of intent, and that DCMC was aware of
this.57 Accordingly, the superior court was not required to
consider whether ACC implicitly waived its right to receive this
[different] letter of intent by failing to complain when DCMC did
not send a revised letter of intent.58 Although it is possible
that ACC hoped to amend one or more terms in DCMCs standard five
year Letter of Intent, the superior court did not err in finding
that both parties understood the May 21 letter of intent to be
the standard letter of intent contemplated in the May 28
agreement, and therefore also did not err by additionally finding
that no further action was required of DCMC in the absence of a
specific request by ACC to negotiate the terms of the May 21
letter of intent.
By finding that both parties understood that the letter
of intent referred to in the May 28 agreement was the May 21
letter of intent, and that the parties did not necessarily expect
that the May 21 letter of intent would contain the final terms of
the letter of intent, the superior court established that DCMC
did not breach the May 28 agreement for failure to provide a
letter of intent. The further implication of these findings was
that ACC, in order to preserve its right to negotiate the letter
of intent, had a duty to respond to the May 21 letter of intent.
The superior court found that, despite numerous interactions with
DCMC in the period immediately following the signing of the May
28 agreement, ACC never disputed the terms of the May 21 letter
of intent, offered alternative proposals to the May 21 letter of
intent, or demanded an alternative letter of intent. These
findings offer sufficient support for the superior courts
conclusion that the May 21 letter of intent was the letter of
intent contemplated in the May 28 agreement, and that ACC
breached the May 28 agreement by failing to sign the May 21
letter of intent. The superior court, therefore, did not err in
reaching this conclusion.
E. Additional Proceedings Are Required To Award ACC
Nominal Damages, Consider Punitive Damages, and
Reconsider Attorneys Fees.
After determining that DCMC was the prevailing party at
trial, the superior court awarded DCMC twenty percent of the
$1,783,513 in attorneys fees that DCMC incurred, for a total
award of $356,702.60. Because we now hold that DCMC did breach
the implied covenant of good faith and fair dealing and committed
the tort of fraudulent misrepresentation, an award of nominal
damages to ACC is required. Therefore, we vacate the superior
courts determination that DCMC was the prevailing party and its
award of attorneys fees in DCMCs favor.59 On remand the superior
court should award nominal damages to ACC, reconsider the
question of who the prevailing party is in this action, and then
award attorneys fees accordingly.60
We have previously remanded a case to the superior
court solely for entry of judgment for nominal damages in the
amount of one dollar.61 However, the superior court will also
need to consider whether punitive damages are called for. We
have previously stated that punitive damages are to be awarded
with caution, after consideration of the severity of the
wrongdoing and the need for deterrence: Since punitive damages
are assessed as an example and warning to others, and a primary
concern of law is payment of just compensation for the wrong
done, punitive damages are not favored in law. They are to be
allowed only with caution and within narrow limits.62 To support
a claim for punitive damages, the plaintiff must show by clear
and convincing evidence that the defendants conduct was
outrageous, such as acts done with malice, bad motive, or
reckless indifference to the interests of another.63
V. CONCLUSION
We AFFIRM the superior courts conclusion that DCMC was
not liable for breach of contract. We REVERSE the superior courts
conclusions that DCMC did not breach the covenant of good faith
and fair dealing and did not commit the tort of fraudulent
misrepresentation. Accordingly, we REMAND to the superior court
for an award of nominal damages to ACC and to consider whether to
award punitive damages for fraudulent misrepresentation. We also
VACATE the award of attorneys fees to DCMC. On remand, the
superior court will need to reconsider prevailing party status
and attorneys fees.
_______________________________
1 129 P.3d 905 (Alaska 2006).
2 The description of the facts in Anchorage Chrysler
Center I, in turn, was drawn primarily from the superior court
opinion, which has not been overtly challenged as wrong on the
facts. Id. at 907.
3 The company has changed its name again and is now
Chrysler Motors LLC. We use DCMC here for consistency with the
superior courts decisions and our opinion in Anchorage Chrysler
Center I.
4 Anchorage Chrysler Center I, 129 P.3d at 910.
5 These claims were listed separately in ACCs opening
brief from the first appeal, but we treated them as a single
claim in our opinion in Anchorage Chrysler Center I. Id.
6 Id.
7 Id.
8 Id. at 913.
9 Id. at 914-16.
10 Id. at 918.
11 Id. at 919.
12 Rockstad v. Global Fin. & Inv. Co., 41 P.3d 583, 586
(Alaska 2002) (citing Lesnoi, Inc. v. Stratman, 956 P.2d 452, 454
(Alaska 1998) and Norton v. Herron, 677 P.2d 877, 880 (Alaska
1984)).
13 Id. (citing Klosterman v. Hickel Inv. Co., 821 P.2d
118, 122 (Alaska 1991)).
14 See Cousineau v. Walker, 613 P.2d 608, 612 (Alaska
1980).
15 Zeman v. Lufthansa German Airlines, 699 P.2d 1274, 1280
(Alaska 1985) (citing ONeill Inv. v. Illinois Employers Ins., 636
P.2d 1170, 1175 n.7 (Alaska 1981)).
16 Id.
17 See id.
18 Anchorage Chrysler Center I, 129 P.3d 905, 913 (Alaska
2006).
19 See Drake v. Wickwire, 795 P.2d 195, 197-98 (Alaska
1990) (citing Restatement (Second) of Contracts 250, 251, 253
(1981)).
20 Restatement (Second) of Contracts 250 (1981).
21 Id. at 715 (quoting Restatement (Second) of Contracts
250 cmt b (1981) and 17A Am. Jur. 2d Contracts 738, at 752
(1991)); See also K & K Recycling, Inc. v. Alaska Gold Co., 80
P.3d 702, 715-16 (Alaska 2003) (concluding that letter from one
partys attorney that imposed new restrictions after contract was
formed was not repudiation because letter did not convey
unequivocal refusal to perform).
22 See id. (quoting Restatement (Second) of Contracts
250, cmt b. (1981)).
23 Anchorage Chrysler Center I, 129 P.3d at 916.
24 Id. at 915.
25 Id. at 916.
26 Id. at 913.
27 Id. at 914 (citing Restatement (Second) of Torts 525
(1977)).
28 ERA Helicopters, Inc. v. Digicon Alaska, Inc., 518 P.2d
1057, 1059-60 (Alaska 1974) (citing Beaulieu v. Elliot, 434 P.2d
665, 670-71 (Alaska 1967)).
29 See id. at 1060 (holding that superior court did not
err in instructing jury to consider awarding damages beyond cost
of item injured by defendants negligence, including business
interruption damages).
30 ACC did not allege any other specific kinds of
consequential losses in its argument on appeal.
31 Anchorage Chrysler Center I, 129 P.3d 905, 916 (Alaska
2006).
32 Id.
33 Zeman v. Lufthansa German Airlines, 699 P.2d 1274, 1280
(Alaska 1985).
34 Zok v. State, 903 P.2d 574, 577-78 (Alaska 1995)
(quoting 1 Marilyn Minzer et al., Damages in Tort Actions 2.10,
at 2-18 (1993)).
35 Id. at 577 (citing Ivy v. Wal-Mart Stores, Inc., 777
S.W.2d 682, 684 (Mo. App. 1989).
36 Anchorage Chrysler Center I, 129 P.3d at 914.
37 Giammanco v. Giammanco, 625 N.E.2d 990, 1001 (Ill. App.
1993).
38 Id. at 999.
39 Id. at 1000-01.
40 See supra Part IV.B.1.
41 Anchorage Chrysler Center I, 129 P.3d 905, 914 (Alaska
2006) (citing the Restatement (Second) of Torts 525 (1977)).
42 Id. at 918-19.
43 Id. at 918.
44 Id. at 919.
45 Ramsey v. City of Sand Point, 936 P.2d 126, 133 (Alaska
1997).
46 McConnell v. State, Dept of Health & Social Serv., Div.
of Med. Assistance, 991 P.2d 178, 184 (Alaska 1999) (citing
Chijide v. Maniilaq Assn, 972 P.2d 167, 172 (Alaska 1999)).
47 Id.
48 Id. (quoting Chijide, 972 P.2d at 172).
49 See Anchorage Chrysler Center I, 129 P.3d 905, 914
(Alaska 2006) (citing the Restatement (Second) of Torts 525
(1977)).
50 McConnell, 991 P.2d at 184.
51 Id.
52 See ARCO Alaska, Inc. v. Akers, 753 P.2d 1150, 1153-54
(Alaska 1988) (noting that we have only awarded contract damages
in cases involving breach of the covenant of good faith and fair
dealing implied in employment contracts).
53 Id. at 1154.
54 Anchorage Chrysler Center I, 129 P.3d at 917 (In its
complaint, ACC claimed by implication that DCMCs failure to send
a new letter of intent was a breach of contract.).
55 Id. at 917-18.
56 Id. at 918.
57 Id.
58 Id.
59 See Romulus v. Anchorage Sch. Dist., 910 P.2d 610, 619
(Alaska 1996) (vacating attorneys fee award and remanding for new
determination of prevailing party status in light of decision to
reverse superior court on issue of partys unpaid suspension).
60 See Day v. Moore, 771 P.2d 436, 437 (Alaska 1989)
(granting superior court broad discretion in determining
prevailing party).
61 Zok v. State, 903 P.2d 574, 579 (Alaska 1995)
(declining to follow the approach adopted by courts of other
jurisdictions that have refused to reverse a judgment merely for
the purpose of permitting the recovery of nominal damages).
62 Alaska Placer Co. v. Lee, 553 P.2d 54, 61 (Alaska
1976).
Brandner v. Hudson, 171 P.3d 83, 89 (Alaska 2007) (quoting
Chizmar v. Mackie, 896 P.2d 196, 210 (Alaska 1995)); AS
09.17.020(b).
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