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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Gefre v. Davis Wright Tremaine, LLP (8/2/2013) sp-6804
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, email
corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
NICHOLAS A. GEFRE and CHARLES )
T. BECK, individually and as a derivative )
action on behalf of PETRO ALASKA, )
INC., an Alaskan corporation, )
) Supreme Court Nos. S-13675/13745
Appellants, )
) Superior Court No. 1KE-07-00370 CI
v. )
) O P I N I O N
DAVIS WRIGHT TREMAINE, LLP; )
JON S. DAWSON; RICHARD A. )
KLOBUCHER; BURR PEASE & )
KURTZ; and JOHN C. SIEMERS, )
) No. 6804 - August 2, 2013
Appellees. )
)
)
BURR PEASE & KURTZ and JOHN C. )
SIEMERS, )
)
Cross-Appellants, )
)
v. )
)
NICHOLAS A. GEFRE and CHARLES )
T. BECK, individually and as a derivative )
action on behalf of PETRO ALASKA, )
INC., an Alaskan corporation, )
)
Cross-Appellees. )
)
----------------------- Page 2-----------------------
Appeal from the Superior Court of the State of Alaska, First
Judicial District, Ketchikan, Trevor Stephens, Judge.
Appearances: Daniel W. Hickey and Anne M. Preston,
Gruenstein & Hickey, Anchorage, and James J. Ragen and
Gail M. Ragen, Ragen & Ragen, Seattle, Washington, for
Appellants and Cross-Appellees. Patrick B. Gilmore,
Atkinson, Conway & Gagnon, Anchorage, for Appellees
Davis Wright Tremaine, LLP, Jon S. Dawson, and Richard
A. Klobucher. Clay A. Young and Kendra E. Bowman,
Delaney Wiles, Inc., Anchorage, for Appellees and Cross-
Appellants Burr Pease & Kurtz and John C. Siemers.
Before: Carpeneti, Chief Justice, Fabe, Winfree, and
Stowers, Justices. [Christen, Justice, not participating.]
WINFREE, Justice.
I. INTRODUCTION
Shareholders of a closely held corporation brought a derivative suit against
a shareholder-director and the corporation's former attorneys for fiduciary fraud,
fraudulent conveyance, legal malpractice, and civil conspiracy. After an evidentiary
hearing, the superior court ruled all the claims were time-barred. We affirm the superior
court's dismissal of most claims, but reverse its dismissal of two claims and remand
those claims for further proceedings.
II. FACTS AND PROCEEDINGS
A. Facts
1. Gefre, Beck, and Steffen form Island Fuel (Petro Alaska).
Nicholas Gefre, Charles Beck, and Edward Steffen, who were friends and
co-workers, formed Island Fuel, Inc. (Petro Alaska) in 1985. Steffen took 52% of the
corporation's stock; Gefre and Beck took 24% each. Each became a member of the
Board of Directors. The Board appointed Steffen President, Gefre Vice-President, and
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Beck Secretary and Treasurer. None had prior corporate experience, and despite his title
as Secretary, Beck did not maintain the corporate books or minutes. Steffen acted as the
company manager and Gefre and Beck worked in the company's day-to-day operations.
Petro Alaska was successful and there was agreement to expand operations.
In January 1988 Steffen and his wife leased a Ketchikan property (the Property) from
1
Stephen and Cheryl Day. Steffen executed the lease in his name, although the lease
referenced him as an individual doing business as Petro Alaska; the lease also indicated
that Petro Alaska would make improvements on the Property. The Board met in
December 1988 and ratified the lease and authorized Steffen to pursue, on Petro Alaska's
behalf, a lease with an option to purchase the Property.
2. Steffen retains Davis Wright Tremaine.
In December 1988 Steffen contacted the law firm Davis Wright Tremaine
(DWT) to represent Petro Alaska. The initial engagement letter from DWT partner
Richard Klobucher stated DWT would provide Petro Alaska general corporate
representation and "eventually [represent] all of the shareholders in personal estate and
estate tax planning matters." The corporate representation specifically included a review
of current corporate affairs. DWT then prepared the December 1988 Board meeting
minutes, which reflected that the Property was a corporate opportunity Steffen was
pursuing on Petro Alaska's behalf. DWT soon began estate planning for Steffen, but had
no direct contact with Gefre or Beck.
DWT partner Judith Nevins helped Steffen pursue a lease of the Property
1 Both Steffen's and his wife's names were on the Property lease and later
on the Property's title when it was purchased. Both were also named as defendants in
this suit. But for ease of reference we use "Steffen" to refer both to Steffen individually
when discussing his actions and to the Steffens collectively when discussing the Property
ownership.
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with an option to purchase. Nevins understood DWT represented Petro Alaska, and
advised Steffen that the lease should be in Petro Alaska's name. Steffen initially agreed,
but later told Nevins that the Days wanted the lease made in Steffen's name. Believing
it was an accommodation to the Days, Nevins drafted a letter to the Days' attorney
stating Steffen, rather than Petro Alaska, would be the lessee. Nevins did not
communicate this change to Gefre or Beck because she believed Steffen would do so.
Nevins finalized the lease in January 1990. The lease granted Steffen an
option to purchase the Property, with a rebate on the purchase price equivalent to rent
paid. It did not memorialize Nevins's understanding that Steffen held the Property for
Petro Alaska's benefit; instead, it provided that the Property could be subleased by
Steffen to Petro Alaska only if Steffen maintained at least 52% ownership of Petro
Alaska. DWT billed Petro Alaska for its lease-related legal fees.
Steffen informed Gefre and Petro Alaska's bookkeeper that he had
negotiated a five-year lease for the company with a purchase option. He did not disclose
that the lease was in his name. The Board did not formally adopt or ratify the lease at
Petro Alaska's December 1991 Board meeting, which was its last official meeting prior
to this litigation. Petro Alaska paid the lease rent, and its financial statements for 1990
through 1992 indicated that Petro Alaska leased and had an option to purchase the
Property.
3. Steffen exercises the purchase option.
Steffen exercised the purchase option in December 1993 and took title to
the Property. He received credit against the purchase price for Petro Alaska's lease
payments. Petro Alaska's 1993 financial statement stated: "Effective January 1, 1994,
the company's majority stockholder acquired the property on which its Ketchikan,
Alaska operations are located. Effective January 1, 1994 the company leased this
property from the majority stockholder." Petro Alaska's financial statements from 1994
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to 2006 included the lease payments to Steffen. Petro Alaska's bookkeeper was aware
that Steffen had purchased the Property and was leasing it to Petro Alaska. Gefre and
Beck were not told.
DWT prepared consent minutes in lieu of Board meetings for 1992 through
1994. The 1993 consent indicated Petro Alaska had purchased the Property for
$750,000. The 1994 consent contained a provision on the first page approving the lease
between Steffen and Petro Alaska. Gefre and Beck signed the second page, but later
denied seeing or approving the provision ratifying the lease between Steffen and Petro
Alaska.
Gefre discovered by early 1995 that Steffen owned the Property. He
confronted Steffen, who claimed he purchased it for Petro Alaska because the Days did
not want to sell to a corporation. Steffen assured Gefre that he held the Property for
Petro Alaska and would transfer title. Steffen repeatedly promised Gefre that he would
transfer the title, but did not.
4. Gefre retains attorney Clay Keene.
Gefre retained Ketchikan attorney Clay Keene in 1997 to help secure title
to the Property for Petro Alaska. Keene advised Gefre that he had fiduciary duties as a
Board member and could be personally liable to Petro Alaska for not fulfilling those
duties. Specifically, Keene informed Gefre that his fiduciary duties included ensuring
Petro Alaska received title to the Property.
In November 1997 Keene ghostwrote a letter to Steffen for Gefre and Beck.
In this letter Gefre and Beck acknowledged Petro Alaska had not maintained required
corporate formalities, including Board meetings, and stated a desire to begin doing so.
They also acknowledged Steffen held title to the Property as an accommodation to Petro
Alaska, and asked Steffen to transfer the Property to Petro Alaska by the end of 1997.
They requested that Gefre, Beck, and Steffen meet with Petro Alaska's outside
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accountant, Peter Hogan, to discuss tax consequences of transferring the Property to
Petro Alaska.
Gefre, Beck, and Steffen met with Hogan in November 1997. They agreed
Steffen would transfer title to Petro Alaska and the shareholders as individuals. Steffen
stated he would work with Hogan to transfer the title, and Hogan memorialized the
meeting. Neither Gefre nor Beck contacted Hogan to verify whether title had been
transferred. Nothing changed with respect to how Petro Alaska's directors conducted
corporate affairs. In 1998 Steffen contacted DWT about establishing a limited liability
company into which he could transfer his real estate holdings, including the Property.
Petro Alaska was billed for at least some of this work.
5. Beck requests a buyout, and Steffen destroys records.
Beck's health deteriorated in the late 1990s and he left Alaska for medical
treatment. He asked for a buyout of his Petro Alaska shares in 2000, but this did not
occur. Petro Alaska continued to pay Beck's wages and health insurance for a time, but
these payments eventually were discontinued.
In 2000 Beck contacted Connie Williams, Petro Alaska's bookkeeper from
1986 to 1997, regarding possible corporate wrongdoing by Steffen. She provided Beck
a list of suspected improprieties, including appropriating corporate money to acquire
personal property, funding personal real estate ventures with corporate funds, and
personally purchasing the Property with Petro Alaska making the loan payments coded
as "rent." Beck believed Williams, but did not show the list to Gefre or Hogan. Near the
same time, a Petro Alaska employee informed Beck that Steffen was destroying
corporate records.
In the early 2000s Gefre became aware that Steffen had directed Petro
Alaska staff not to send Gefre financial statements. Gefre nonetheless knew he had a
right to review corporate records. Both Beck and Gefre repeatedly requested corporate
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records from Steffen, but he ignored or put off their requests. Beck concluded before
June 2002 that Steffen would not transfer the Property's title to Petro Alaska.
6. Beck retains attorney Clay Keene and considers suit.
Beck retained Keene in May 2002 regarding Steffen's self-dealing and the
Property. He told Keene about Williams's information on Steffen's self-dealing. He
also gave Keene copies of corporate records he had received from Gefre. In June 2002
Keene ghostwrote a letter for Beck to send to Steffen. In this letter Beck requested
copies of 30 categories of corporate records, including Property-related records, and
requested that all corporate documents be preserved. Beck also informed Steffen that his
failing health required him to liquidate his Petro Alaska shares and offered to sell them
for $500,000. A copy of the letter was sent to Gefre.
In July 2002 Beck received a reply from Petro Alaska, including documents
enabling Beck to resign as a director and officer. In a response ghostwritten by Keene,
Beck declined to resign until his concerns about the company were resolved. He also
requested copies of all corporate minutes and bylaws.
Keene ghostwrote another letter for Beck in late July 2002. This letter to
Steffen reiterated Beck's demands for corporate records, including records related to the
Property, stated his intent to remain a director, and expressed his concern with Steffen's
record-request obstruction. Beck copied Gefre and a Petro Alaska employee, asking the
employee to send him copies of certain records.
Steffen referred Beck's letters to attorney Jonathan Michaels at DWT.
Michaels did not know former DWT partner Nevins, who had left DWT before he joined
the law firm, and had had no prior contact with Petro Alaska. Michaels drafted a
response to Beck's second letter for Steffen, which Steffen modified. Steffen's response
included certain corporate records and stated that: (1) he purchased the Property and
leased it to Petro Alaska; (2) the other requested records could be reviewed at Petro
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Alaska's offices; (3) neither Petro Alaska nor its shareholders were able to purchase
Beck's shares; and (4) Petro Alaska requested Beck's resignation because he had not
actively participated in managing Petro Alaska.
In August 2002 Beck contacted Keene to express concerns about
incomplete corporate minutes. He also stated his fear that Steffen might attempt to
bankrupt Petro Alaska and leave. Keene ghostwrote another letter for Beck to send to
Steffen, reiterating Beck's demands for corporate records, stating Steffen's purchase of
the Property was a misappropriation of Petro Alaska's corporate opportunity, and stating
Beck could not be removed as a director or officer. Gefre was sent a copy.
At this time Beck began considering legal action against Steffen. He again
contacted former bookkeeper Williams and asked for information on Steffen's self-
dealing. She responded with information about several instances of Steffen's self-
dealing and offered further assistance. Beck never followed up with Williams.
Beck consulted further with Keene, who advised him that although he could
be removed as a director, Beck retained access to the Board's records as a shareholder.
In August Beck had Keene ghostwrite more letters to Steffen, containing demands and
statements similar to Beck's previous letters. Keene advised Beck that a suit against
Steffen was possible, but suggested that contacting the Alaska Department of Labor
(DOL) to file a complaint might yield the same results as litigation. He also noted that
if Beck personally pursued an action against Steffen, Steffen could avail himself of Petro
Alaska's assets to defend himself at the company's expense. In September 2002 Beck
contacted DOL about investigating Steffen. He emphasized that Steffen had "essentially
stol[en]" the Property from Petro Alaska, but DOL declined to investigate.
DWT referred Beck's August 2002 inquiries to the law firm Burr Pease &
Kurtz (BPK). In October John Siemers of BPK ghostwrote a letter for Steffen to send
to Beck stating that Steffen owned the Property, Petro Alaska owned the improvements
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----------------------- Page 9-----------------------
on the Property, and the purchase was reflected in Petro Alaska's records. The letter also
stated that Petro Alaska would consider replacing Beck at its next Board meeting.
In November 2002 Keene ghostwrote two more letters for Beck to send to
Steffen, asserting Steffen had breached his fiduciary duties to Petro Alaska by engaging
in self-dealing. Siemers ghostwrote Steffen's response to these two letters, describing
Beck's allegations as "reckless" and lacking a basis in fact. The letter also advised Beck
to retain an attorney if Beck believed he had "a claim against the company." The letter
stated Petro Alaska was "prepared to defend itself in a court of law, if necessary." BPK
did no further legal work for Petro Alaska after 2002. It closed its file on Petro Alaska
in 2004 and destroyed its Petro Alaska records in August 2005.
In November 2002 Steffen formed Steffen Properties, LLC (the LLC) with
DWT's help. He then transferred the Property to the LLC.
Because he was indicted on an unrelated criminal matter and because Keene
would not accept the case on a contingent fee basis, Beck did not bring suit in 2002 or
2003. Afraid of "rock[ing] the boat," Gefre did not join Beck's efforts, review corporate
records, take efforts to hold the required Board meetings, or further investigate the self-
dealing assertions made by Williams. In December 2002 Gefre and Steffen accepted
Beck's resignation as a Petro Alaska officer and removed him as a director.
Petro Alaska retained copies of its pre-2000 records until 2006. An
employee destroyed these records in 2006 because she had heard nothing further from
Beck regarding corporate records. Beck and Gefre did not further pursue their concerns
until Beck contacted a new attorney in May 2006. That attorney briefly reviewed Beck's
files and concluded Beck required litigation counsel; Beck and Gefre then retained a new
law firm. Through counsel, Gefre and Beck made a corporate records inspection demand
to Steffen in February 2007 requesting all documents related to the Property. DWT
provided copies of all Property-related records.
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B. Proceedings
In August 2007 Gefre and Beck, individually and derivatively on behalf of
Petro Alaska (collectively the Shareholders), filed suit against Steffen, the LLC, DWT,
and DWT partner Jon Dawson. The complaint alleged: (1) fiduciary fraud by DWT and
Steffen; (2) misappropriation of corporate opportunities by Steffen; (3) participation by
DWT in Steffen's tortious conduct; (4) legal malpractice by DWT; and (5) fraudulent
conveyance of the Property by DWT and Steffen. The Shareholders requested
imposition of a constructive trust on the Property, an accounting by Steffen, and punitive
damages. The Shareholders also requested that DWT and Steffen be estopped from
asserting a statute-of-limitations defense.
The Shareholders did not sue BPK because they were unaware of its 2002
involvement on behalf of Petro Alaska. BPK initially represented Steffen in the suit.
The Shareholders' counsel then came upon a 2002 BPK billing in Petro Alaska's general
ledger, and in January 2008 BPK disclosed the nature of its 2002 assistance with
Steffen's responses to Beck's letters. In February 2008 the Shareholders amended their
complaint to add Klobucher, Siemers, and BPK as defendants. The Shareholders also
added an intentional spoliation of evidence claim against Steffen and BPK for destruction
of records. Steffen settled with the Shareholders in May 2008 and transferred the
Property to Petro Alaska.
Both DWT and BPK moved for summary judgment based on statutes-of-
limitations defenses. The superior court denied DWT's and BPK's motions, but
scheduled an evidentiary hearing on the statutes-of-limitations issues. The Shareholders
objected to the evidentiary hearing. In July 2009 the superior court held the evidentiary
hearing, and in October 2009 the court dismissed the Shareholders' claims as time-barred
and entered final judgment.
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The Shareholders appeal the dismissal of all the claims against the attorneys
as time-barred. BPK cross-appeals the superior court's refusal to recognize an offer of
judgment in awarding fees and costs.
III. STANDARD OF REVIEW
The date on which a claim accrues is a factual question, which we review
2
for clear error. However, we review de novo the legal standard used to determine
3
accrual dates, and we review de novo questions regarding the applicable statute of
4
limitations, the interpretation of that statute, and whether that statute bars a claim.
We apply our independent judgment to questions of constitutional law,5
including questions regarding the extent of the right to a trial by jury and the right to
6
equal protection. We "adopt the rule of law that is most persuasive in light of precedent,
reason, and policy."7
2 Sengupta v. Wickwire, 124 P.3d 748, 752 (Alaska 2005) (citing Alderman
v. Iditarod Props., Inc. , 104 P.3d 136, 140 (Alaska 2004)).
3 See City of Fairbanks v. Amoco Chem. Co., 952 P.2d 1173, 1178-80
(Alaska 1998) (reviewing de novo applicable accrual standards).
4
Weimer v. Cont'l Car & Truck, LLC, 237 P.3d 610, 613 (Alaska 2010)
(citing Smallwood v. Cent. Peninsula Gen. Hosp., 151 P.3d 319, 322-23 (Alaska 2006)).
5
Fraternal Order of Eagles v. City & Borough of Juneau , 254 P.3d 348, 352
(Alaska 2011) (citing State, Dep't of Health & Soc. Servs. v. Planned Parenthood of
Alaska, Inc. , 28 P.3d 904, 908 (Alaska 2001)).
6 See, e.g., Pomeroy v. Rizzo ex rel. C.R., 182 P.3d 1125, 1128 (Alaska 2008)
(reviewing by independent judgment constitutional right to trial by jury); Pub. Emps.'
Ret. Sys. v. Gallant , 153 P.3d 346, 349 (Alaska 2007) ("The equal protection challenge
presents a question of law to which this court applies its independent judgment." (citing
Alaska Civil Liberties Union v. State , 122 P.3d 781, 785 (Alaska 2005))).
7
Fraternal Order of Eagles , 254 P.3d at 352 (quoting Alaskans for Efficient
(continued...)
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IV. DISCUSSION
A. Statutes-Of-Limitations Rulings
1. Overview
The Shareholders raise several arguments regarding the superior court's
statutes-of-limitations rulings. To analyze these arguments, we must address the statutes
of limitations applicable to the Shareholders' claims, the proper rule for determining
when the claims accrued, and whether the claims' accrual should be delayed. We then
address whether equitable estoppel forecloses the statutes-of-limitations defenses.
2. Applicable statutes of limitations
The Shareholders claim the superior court erred by: (1) refusing to apply
AS 09.10.230's ten-year statute of limitations to the conspiracy and fraudulent
conveyance claims; and (2) applying the two-year tort statute of limitations to the
fiduciary fraud and intentional spoliation claims.
a. Alaska Statute 09.10.230 does not apply to the conspiracy
and fraudulent conveyance claims.
Alaska Statute 09.10.230 provides that actions to determine a person's
"right or claim to or interest in real property" must be brought within ten years.8 The
superior court ruled AS 09.10.230 applied to the Shareholders' misappropriation of
corporate opportunities claim, which directly related to Petro Alaska's interest in the
Property, but not to the Shareholders' other claims indirectly related to the Property.
7 (...continued)
Gov't, Inc. v. State, 153 P.3d 296, 298 (Alaska 2007)).
8 AS 09.10.230 incorporates the ten-year limitations period provided in AS
09.10.030. See AS 09.10.230 (providing action for determination of right or claim to or
interest in real property must be "commenced within the limitations provided for actions
for the recovery of the possession of real property"); AS 09.10.030 (providing action for
recovery of possession of real property must be commenced within ten years).
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The Shareholders argue that a civil conspiracy claim for depriving an owner
of real property is subject to AS 09.10.230's ten-year limitations period. The
Shareholders state the superior court correctly applied AS 09.10.230 to claims against
Steffen for his wrongful acquisition and retention of title to the Property. But the
Shareholders then contend that because the "nature of the unlawful conduct underlying
the conspiracy determines the applicable statute," the conspiracy claims against DWT
related to Steffen's acquisition of the Property must also be subject to AS 09.10.230.
The Shareholders also argue that a direct fraudulent conveyance claim against DWT
9
(under AS 34.40.010 ) specifically requires application of AS 09.10.230.
We agree with the superior court's conclusion that the ten-year statute of
limitations under AS 09.10.230 does not apply to the Shareholders' civil conspiracy and
fraudulent conveyance claims. Because "[AS] 09.10.230 contemplates a dispute over
an interest in real property,"10 we have previously applied it where the nature of the
11
ownership interest was the central issue. We have not applied AS 09.10.230 where the
"issue [was] not the ownership interest itself but [rather] improprieties in the bargaining
that resulted in the conveyance of that interest."12 To invoke AS 09.10.230's limitations
period, it is not enough for a claim to be merely attendant to an underlying conveyance
9 AS 34.40.010 provides in relevant part that "a conveyance or assignment
. . . of an estate or interest in land . . . or of rents or profits issuing from them . . . made
with the intent to hinder, delay, or defraud creditors . . . is void."
10 Bauman v. Day , 892 P.2d 817, 825 (Alaska 1995).
11 Carter v. Hoblit, 755 P.2d 1084, 1085-86 (Alaska 1988) (applying
AS 09.10.230 to equitable request for one-third interest in property that three individuals
had intended to purchase and hold title to jointly, where group member conducting the
transaction took deed in his name alone and fraudulently concealed his action). See also
Bauman , 892 P.2d at 825 (discussing Carter).
12 Bauman , 892 P.2d at 825.
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----------------------- Page 14-----------------------
of a property interest - it must directly involve "the determination of a right or claim
13
to or interest in real property." The ten-year statute of limitations under AS 09.10.230
applied to the Shareholders' misappropriation claim against Steffen because the
misappropriated opportunity was the lease and ownership of the Property and the relief
sought was recovery of the Property. Because the conspiracy claims against DWT and
BPK involve only improprieties regarding Steffen's acquisition and retention of the
Property, and not the ownership interest itself, AS 09.10.230 is not applicable to these
claims.14
We similarly conclude that AS 09.10.230 is not applicable to the fraudulent
conveyance claim against DWT. Alaska Statute 34.40.010 does not create a special
mechanism to recover land, but rather creates a method by which a creditor may reach
15
The direct fraudulent
assets in a third-party's hands by voiding an improper transfer.
conveyance claim concerns DWT's conduct relating to Steffen's retention of the
Property, not Petro Alaska's interest in the Property. Accordingly AS 09.10.230 is
inapplicable to the direct fraudulent conveyance claim.
b. Alaska Statute 09.10.053 applies to all claims against
DWT and BPK.
Contract claims are subject to a three-year statute of limitations under
13 AS 09.10.230.
14 See Bauman, 892 P.2d at 825 (finding AS 09.10.230 inapplicable because
"[t]he dispute over title and possession arose from the foreclosure sale, while the contract
and fraud claims arose from the original sale of the property").
15
See AS 34.40.010; see also Gabaig v. Gabaig , 717 P.2d 835, 838 (Alaska
1986) (stating under AS 34.40.010, "[a] conveyance intended to hinder, delay or defraud
creditors or other persons in their lawful suits is void").
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----------------------- Page 15-----------------------
16
AS 09.10.053. We have held previously that actions for a breach of a fiduciary duty
arising out of a professional services relationship generally are governed by
17
AS 09.10.053. In contrast, tort claims generally must be brought within two years
under AS 09.10.070.18
The Shareholders argue AS 09.10.053 should apply to the fiduciary fraud
claims against DWT and BPK. But the superior court did apply AS 09.10.053 to these
claims. The court initially stated that "[m]ost of [the Shareholders'] causes of action
against DWT [and BPK] are subject to" AS 09.10.053, and then listed only the spoliation
and fraudulent conveyance claims as subject to AS 09.10.070.
The Shareholders also argue the court incorrectly applied the two-year
statute of limitations under AS 09.10.070 to the claims for spoliation by BPK and
fraudulent conveyance by DWT. The Shareholders contend the court should have
applied AS 09.10.053's three-year statute of limitations to these claims.
19
the spoliation
Although intentional spoliation of evidence is a tort claim,
claim in this case arises in connection with the assertion of BPK's breach of fiduciary
duty in a legal malpractice claim. Similarly the fraudulent conveyance claim in this case
16 AS 09.10.053 provides that "[u]nless the action is commenced within three
years, a person may not bring an action upon a contract or liability, express or implied."
17 See Lee Houston & Assocs., Ltd. v. Racine, 806 P.2d 848, 854 (Alaska
1991) (construing former AS 09.10.050, now codified at AS 09.10.053).
18 AS 09.10.070 is a residual statute of limitations in that it governs all claims
"for personal injury . . . not arising on contract and not specifically provided otherwise."
AS 09.10.070(a)(2). See Austin v. Fulton Ins. Co., 444 P.2d 536, 538 (Alaska 1968)
(stating "it is clear that the two-year statute of limitations respecting torts is applicable"
to negligence claims); Silverton v. Marler, 389 P.2d 3, 5 (Alaska 1964) ("A tort action
must be commenced within two years . . . ." (citing AS 09.10.070)).
19 See Allstate Ins. Co. v. Dooley, 243 P.3d 197, 200-01 (Alaska 2010).
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----------------------- Page 16-----------------------
arises in connection with the assertion of DWT's breach of fiduciary duty in a legal
malpractice claim. Because we give preference to the longer limitations statute when
two may reasonably apply,20 AS 09.10.053 provides the appropriate limitations period
for these claims. It was error to apply AS 09.10.070 to the Shareholders' spoliation and
fraudulent conveyance claims.
3. Accrual and timely filing of two claims
The Shareholders argue the superior court made errors in its accrual
findings and conclusions. The general rule is that "accrual of a cause of action is
21
established at the time of the injury." Under this rule, we determine whether a claim
was timely filed by computing the time period between when the cause of action accrued
and when the plaintiff filed a claim. If this time period does not exceed the applicable
statute of limitations, then the claim is timely filed.22
20 City of Fairbanks v. Amoco Chem. Co. , 952 P.2d 1173, 1181 (Alaska 1998)
("If two limitations statutes may reasonably apply, preference is given to the longer
limitations period.").
21
Cameron v. State, 822 P.2d 1362, 1365 (Alaska 1991). See also John's
Heating Serv. v. Lamb , 46 P.3d 1024, 1031 n.14 (Alaska 2002) ("The date on which the
statute of limitations begins to run is usually the 'date on which the plaintiff incurs
injury.' " (quoting Russell v. Municipality of Anchorage , 743 P.2d 372, 375 (Alaska
1987))).
22 The Shareholders argue the superior court erred by applying the accrual
rule, and not an "express trust" method of accrual, which delays accrual until a trustee
clearly repudiates an express trust. See Arneman v. Arneman, 264 P.2d 256, 262 (Wash.
1953) ("[T]he statute of limitations begins to run on a resulting trust, not when such trust
comes into being, but when the trustee repudiates the trust and notice of such repudiation
is brought home to the beneficiary."). The Shareholders contend that under this method
the limitations period on the breach of fiduciary duty claims could not have begun to run
before Steffen's unequivocal 2002 disavowal of holding the Property in trust for Petro
Alaska. But the Shareholders never claimed that Steffen held the Property in express
(continued...)
-16- 6804
----------------------- Page 17-----------------------
a. Spoliation claim
The record destruction underlying the spoliation claim against BPK
occurred in August 2005. As discussed above, we agree with the Shareholders that this
23
Because the
claim is subject to AS 09.10.053's three-year statute of limitations.
Shareholders added this claim in February 2008, before the three-year period expired,
this claim was timely filed. We therefore reverse the dismissal of this claim on statute-
of-limitations grounds.
b. Legal malpractice claims
The Shareholders challenge the court's dismissal of the legal malpractice
claims against DWT and BPK. The superior court ruled that the claims against Steffen
for an interest in the Property accrued by mid-1996, indicating the limitations period
under AS 09.10.230 expired in mid-2006. The Shareholders argued at the evidentiary
hearing that DWT and BPK committed legal malpractice by not warning Petro Alaska
that potential causes of action against Steffen were set to be statutorily barred. Because
the court found the statute of limitations on the AS 09.10.230 claims against Steffen
expired in 2006, the Shareholders argue Petro Alaska suffered a new harm at this point
and that the claims for legal malpractice based thereon could not have expired until 2009.
In contrast, BPK argues that under the discovery rule the applicable statute of limitations
22 (...continued)
trust; the Shareholders claimed Steffen held the Property in constructive trust. Cf.
D.A.W. v. State, 699 P.2d 340, 342 (Alaska 1985) ("A party may not raise for the first
time on appeal an alleged error to which he failed to object to in the [superior] court."
(quoting Chugach Elec. Assoc. v. Lewis, 453 P.2d 345, 349 (Alaska 1969))). And even
if we were to consider the express trust argument for the first time on appeal, it is
unavailing - because the claims are subject to a three-year statute of limitations they
would have expired in 2005, two years before suit was brought in 2007. We therefore
decline to consider adopting an express-trust accrual rule.
23 See Part IV.A.2.b, above.
-17- 6804
----------------------- Page 18-----------------------
began running once Gefre and Beck became aware of all the elements of the legal
malpractice claims.
The expiration of claims against Steffen is a legal harm distinct from
Steffen's misappropriation of the corporate opportunity. Because a claim generally does
not accrue until the plaintiff suffers the harm giving rise to it, the legal malpractice claims
against DWT and BPK for failing to warn Petro Alaska of the expiration of the
limitations period did not accrue until 2006. Contrary to BPK's argument and for the
reasons we discuss below, the discovery rule operates only to lengthen - and never to
24
Given the three-year limitations period under AS
shorten - the limitations period.
09.10.053, the legal malpractice claims based on the alleged failure to advise Petro
Alaska of the expiration of the limitations period against Steffen were timely filed in
2007 and 2008.25 It therefore was error to dismiss these limited legal malpractice claims.
4. Discovery rule and remaining claims
a. Doctrinal framework
Although a cause of action generally accrues when the plaintiff incurs an
injury, accrual can be delayed under a statutory or common-law discovery rule. For
example, in AS 09.10.230 the legislature adopted a statutory discovery rule for
fraudulent conveyance actions, delaying accrual of the ten-year statute of limitations until
the fraud is discovered. The Shareholders assert, based on the argument that the
conspiracy and fraudulent conveyance claims against DWT and BPK arise under AS
09.10.230, that accrual of these claims should be statutorily delayed. But because we
24 Jarvill v. Porky's Equip., Inc. , 189 P.3d 335, 339 (Alaska 2008).
25 Because we conclude these limited legal malpractice claims against DWT
and BPK are not time-barred, we do not need to address the Shareholders' argument that
a continuous representation rule should have been applied to toll these claims.
-18- 6804
----------------------- Page 19-----------------------
26
conclude the claims are not subject to AS 09.10.230, the superior court correctly ruled
this statutory discovery rule is not applicable.
The common-law discovery rule tolls the running of an applicable statute
of limitations "[w]here an element of a cause of action is not immediately apparent."27
It "developed as a means to mitigate the harshness that can result from the [accrual]
rule's preclusion of claims where the injury provided insufficient notice of the cause of
28
action to the plaintiff." As we have explained:
[T]he statute of limitations does not begin to run until the
claimant discovers, or reasonably should have discovered, the
existence of all elements essential to the cause of action.
Thus we have said the relevant inquiry is the date when the
claimant reasonably should have known of the facts
supporting her cause of action. We look to the date when a
reasonable person has enough information to alert that person
that he or she has a potential cause of action or should begin
[29]
an inquiry to protect his or her rights.
Accordingly the discovery rule may provide different possible dates on
26 See Part IV.A.2.a, above.
27 John's Heating Serv. v. Lamb , 46 P.3d 1024, 1031 (Alaska 2002) (citing
Pedersen v. Zielski , 822 P.2d 903, 906-07 (Alaska 1991)).
28 Cameron v. State, 822 P.2d 1362, 1365 (Alaska 1991) (citing Hanebuth v.
Bell Helicopter Int'l, 694 P.2d 143, 146 (Alaska 1984)); see also id. at 1365 n.5
("[R]ather than characterize the discovery rule as a mitigating, pseudo-equitable doctrine,
it is more appropriate to view it as specifying the meaning of 'accrual' under the
statute.").
29 Mine Safety Appliances Co. v. Stiles , 756 P.2d 288, 291 (Alaska 1988)
(internal editing marks and citations omitted).
-19- 6804
----------------------- Page 20-----------------------
30
which a statute of limitations can begin to run. First is the inquiry-notice date, "the date
when the plaintiff has information which is sufficient to alert a reasonable person to
31 Second is the actual-notice date, "the date when
begin an inquiry to protect his rights."
[the] plaintiff reasonably should have discovered the existence of all essential elements
32
of the cause of action."
We have held the inquiry-notice date, rather than the actual-notice date, is
33
generally the date from which the statutory period begins to run. But we have noted
this general rule may produce unjust results because inquiry "may be a time-consuming
process," which "may not produce knowledge of the elements of a cause of action within
the statutory period, or it may produce knowledge of the elements of a cause of action
34
only relatively late in the statutory period."
If an inquiry has not been made, we ask in the abstract whether a reasonable
35
inquiry would have produced knowledge of the cause of action. This focuses on an
ideal inquiry with the realization that time for a reasonable investigation is included in
30 John's Heating , 46 P.3d at 1031 (citing Waage v. Cutter Biological Div. of
Miles Labs., Inc. , 926 P.2d 1145, 1148 (Alaska 1996)).
31 Id . (citing Cameron, 822 P.2d at 1366).
32 Id . (citing Cameron, 822 P.2d at 1366).
33 Waage, 926 P.2d at 1148; Cameron, 822 P.2d at 1366.
34 Cameron, 822 P.2d at 1366 ("Either way it is possible that a litigant may
be deprived of his right to bring a lawsuit before he has had a reasonable opportunity to
do so.").
35 Pedersen v. Zielski , 822 P.2d 903, 908 (Alaska 1991).
-20- 6804
----------------------- Page 21-----------------------
the length of the statute of limitations.36
37
We recognize some inquiries will be productive and some will not be. If
an unproductive inquiry has been made, the analysis changes and we ask whether the
38 If the inquiry was not reasonable, then the cause
plaintiff's inquiry was reasonable.
of action accrues at the inquiry-notice date "unless a reasonable inquiry would not have
39 But if a reasonable inquiry was made, the
been productive within the statutory period."
limitations period is tolled until the plaintiff either: (1) "received actual knowledge of"
the facts giving rise to the cause of action; or (2) "received new information which would
prompt a reasonable person to inquire further."40
b. Application of common-law discovery rule
The superior court assumed the Shareholders' initial inquiry in 1995, which
disclosed Steffen held title to the Property, was reasonable. Because Gefre and Beck
individually only periodically asked Steffen about the status of the title transfer, the court
found "the reasonableness [of their inquiry] dissipated over time." Due to Steffen's
repeated promises and failures to transfer title, the court found it should have been
apparent to the Shareholders by mid-1996 that Steffen was not going to voluntarily
transfer title.
36 See Palmer v. Borg-Warner Corp. (Palmer I), 818 P.2d 632, 636 (Alaska
1990) ("Indeed, the length of a limitations period reflects legislative awareness that time
is needed to investigate a course of action before filing suit.").
37 Pedersen , 822 P.2d at 908.
38 Id.
39
Id.
40
Cameron v. State, 822 P.2d 1362, 1367 (Alaska 1991) (quoting Pedersen ,
822 P.2d at 908).
-21- 6804
----------------------- Page 22-----------------------
As to claims against DWT, the superior court found that upon learning
Steffen held title to the Property, a reasonable inquiry into "when, how, and why" he
held title "would have led directly to DWT and DWT's involvement." The court
concluded the Shareholders should have discovered the existence of causes of action
against DWT by mid-1996.
As to claims against BPK, the superior court found that based on Gefre and
Beck's ongoing obligation to conduct a reasonable inquiry concerning Steffen and DWT,
a reasonable investigation would have resulted in discovery of BPK's role in 2002. The
court found several Petro Alaska employees knew of BPK's involvement in 2002 and
a "simple computer search of Petro Alaska's General Ledger would have resulted in the
discovery of BPK and its detailed billing for the 2002 work."
The Shareholders argue the superior court erred in finding they did not
engage in a reasonable inquiry. The Shareholders assert they engaged in a reasonable
but unsuccessful inquiry, and the causes of action should have accrued on the actual-
notice date.
When either or both Gefre and Beck were on inquiry notice is a question
41 and is reviewed for
of fact that "depends upon all of the surrounding circumstances"
42
clear error. Both Gefre and Beck knew the Property's acquisition was an important
corporate opportunity, and they knew by 1995 that the Property was in Steffen's name.
They also knew that Steffen had lied and therefore were aware of their injury. Upon
being placed on inquiry notice in 1995, Gefre and Beck were charged with "an
affirmative duty to investigate all potential causes of action before the statute of
41 Preblich v. Zorea , 996 P.2d 730, 736 (Alaska 2000) (quoting Breck v.
Moore , 910 P.2d 599, 604 (Alaska 1996)).
42 Sengupta v. Wickwire, 124 P.3d 748, 752 (Alaska 2005).
-22- 6804
----------------------- Page 23-----------------------
limitations expire[d],"43 not merely those directly related to Steffen's acquisition of the
44 45
Property. Their inquiry also must have been prompt and diligent. The superior court
found that Gefre and Beck's initial inquiry requesting that Steffen transfer the Property's
title to Petro Alaska was reasonable, but that a reasonable and diligent inquiry would
have required further action when it became clear in 1996 that Steffen would not
voluntarily transfer title. The superior court also found that a reasonable and diligent
inquiry would have disclosed to Gefre and Beck the existence of a cause of action against
DWT and BPK. The Shareholders argue that their inquiry was reasonable but
unsuccessful and that, in any event, Steffen's oft-repeated assurances that he held the
Property in trust for the corporation equitably estopped Steffen, and the corporation's
attorneys, from relying on the statute of limitations.
We do not need to resolve this conflict because even if the superior court
erred in concluding the accrual date for some of the Shareholders' claims was in
mid-1996, the accrual date could not possibly have been later than the end of 2002, when
Steffen unequivocally reneged on his position that he held the Property in trust for the
corporation. But the Shareholders did not bring their lawsuit until 2007. Their inquiry
43 Palmer v. Borg-Warner Corp. (Palmer I), 818 P.2d 632, 634 (Alaska 1990)
(emphasis in original) (citing Mine Safety Appliances Co. v. Stiles , 756 P.2d 288, 292
(Alaska 1988)).
44
Gefre and Beck were directors with corporate fiduciary duties to act "with
the care, including reasonable inquiry, that an ordinarily prudent person in a like position
would use under similar circumstances." AS 10.06.450(b). This included a duty to
know Petro Alaska's business dealings and activities.
45
See id . at 634-35 n.4 ("[W]e do not insist that a claimant actually know the
precise cause of action at the time of the injury, rather we conclude that a claimant must
begin an inquiry as to the cause of injury promptly and diligently once it is apparent that
an injury has occurred due to the possible negligence of another.").
-23- 6804
----------------------- Page 24-----------------------
was therefore unreasonable after 2002. The Shareholders did not satisfy the three-year
statute of limitations for their legal-malpractice-based claims.
The Shareholders nonetheless argue that the accrual of the causes of action
should have been delayed because of their relative lack of sophistication. A party's
46
relative sophistication is considered in a court's accrual findings, but the party does not
have to understand the legal explanation for or significance of an injury before having
47
knowledge sufficient for a cause of action to accrue. By 2002 Gefre and Beck knew
the Property's acquisition represented an important corporate opportunity, the Property
was in Steffen's name, Steffen had not voluntarily transferred title, and he had withdrawn
his statement that he was holding the property in trust for the corporation. Because Gefre
and Beck knew or should have known that legal action needed to be taken to protect
Petro Alaska's rights, their lack of sophistication does not excuse their unreasonable
inquiry after 2002.48
5. Equitable estoppel
A defendant may in some situations be equitably estopped from pleading
49
a statute-of-limitations defense. Equitable estoppel requires the plaintiff to show:
"(1) fraudulent conduct, which may take the form of either an affirmative
46 Sengupta, 124 P.3d at 753 (quoting Preblich v. Zorea , 996 P.2d 730, 736
(Alaska 2000)).
47 See Mine Safety , 756 P.2d at 291 ("A plaintiff does not have to understand
the technical or scientific explanation for a defect before having knowledge sufficient to
start the statute of limitations running." (citing Sharrow v. Archer, 658 P.2d 1331, 1334-
35 (Alaska 1983))).
48
Id. ("We look to the date when a reasonable person has enough information
to alert that person that he or she has a potential cause of action or should begin an
inquiry to protect his or her rights." (citing Sharrow, 658 P.2d at 1334)).
49 See Williams v. Williams, 129 P.3d 428, 432 (Alaska 2006).
-24- 6804
----------------------- Page 25-----------------------
misrepresentation or a failure to disclose facts where there is a duty to do so;
50 It cannot be invoked "unless [the person has]
(2) justifiable reliance; and (3) damage."
51 In other words,
exercised due diligence in attempting to uncover the concealed facts."
"a party should be charged with knowledge of the fraudulent misrepresentation or
concealment only when it would be utterly unreasonable for the party not to be aware
of the deception."52
The superior court found that DWT's and BPK's identities were known by
Petro Alaska's employees and revealed within its general ledger. The court also found
Gefre and Beck both were aware that Petro Alaska had retained attorneys for some
matters. In addressing the Shareholders' equitable estoppel arguments, the superior court
noted Gefre and Beck had an affirmative duty by 1995 to investigate all claims related
to the Property. The court stated that a reasonable investigation would have focused on
how Steffen acquired the Property and who represented Petro Alaska during that time
"to find out what they knew about how this very important corporate opportunity had not
been realized by [Petro Alaska]." The superior court stated that "[s]uch a reasonable
initial investigation would have led directly to DWT." The court also looked at what
Gefre and Beck as "ordinarily prudent person[s] in similar circumstances" should have
done and discovered "in view of their own fiduciary duties and obligations under
53
AS 10.06.450." The superior court concluded that it would have been utterly
50 Id. (citing Waage v. Cutter Biological Div. of Miles Labs., Inc., 926 P.2d
1145, 1149 n.7 (Alaska 1996)).
51 Id. (quoting Waage, 926 P.2d at 1151).
52 Waage, 926 P.2d at 1149 (emphasis added) (quoting Palmer v. Borg-
Warner Corp. (Palmer II), 838 P.2d 1243, 1251 (Alaska 1992)).
53 AS 10.06.450(b) provides that "[a] director shall perform [his] duties . . .
(continued...)
-25- 6804
----------------------- Page 26-----------------------
unreasonable for Gefre and Beck not to be aware of DWT's and BPK's alleged deception
and concealment by 1996 and 2002, respectively.
The Shareholders argue the superior court's finding that their actions were
utterly unreasonable is clearly erroneous, and request that we apply equitable estoppel
to extend the limitations period of AS 09.10.053. The Shareholders argue DWT and
BPK effectively concealed their involvement in the Property issues, despite an ongoing
fiduciary duty to disclose. The Shareholders also claim the superior court's application
54
Specifically the Shareholders
of AS 10.06.450(b) violates the Alaska Constitution.
argue the superior court's implicit ruling that AS 10.06.450(b) displaced the "utterly
unreasonable" standard regarding accrual of the relevant statute of limitations is an equal
protection violation.
Again we do not need to resolve whether the Shareholders' investigation
during the 1996-2002 period was sufficient. Once Steffen renounced his earlier position
that he held the Property in trust for the corporation, he was not equitably estopped from
55
Because at least starting in late 2002 the
asserting the statute-of-limitations defense.
Shareholders failed to "exercise[] due diligence in attempting to uncover the concealed
facts" regarding the Property and because it would not be utterly unreasonable for them
53 (...continued)
in good faith, in a manner the director reasonably believes to be in the best interests of
the corporation, and with the care, including reasonable inquiry, that an ordinarily
prudent person in a like position would use under similar circumstances."
54 The Shareholders expressly limit the constitutional challenge to the superior
court's application of AS 10.06.450(b). The Shareholders do not argue AS 10.06.450
is facially unconstitutional.
55
Gudenau & Co. v. Sweeny Ins., Inc., 736 P.2d 763, 769 (Alaska 1987)
("Plaintiff must also show that it resorted to legal action within a reasonable period after
the circumstances ceased to justify delay.").
-26- 6804
----------------------- Page 27-----------------------
to be aware of DWT's and BPK's identity and involvement thereafter, the Shareholders
cannot invoke equitable estoppel now.56
We reject the Shareholders' equal protection violation argument. Alaska
Statute 10.06.450(b) required Gefre and Beck to perform their duties as directors "with
the care, including reasonable inquiry, that an ordinarily prudent person in a like position
would use under similar circumstances." Gefre and Beck's status as directors and AS
10.06.450(b)'s "reasonable inquiry" standard assist in evaluating Gefre and Beck's
investigatory diligence. It does not hold them to a different standard - it merely holds
them to a reasonable standard based "upon all of the surrounding circumstances."57
Accordingly the superior court did not commit an equal protection violation.
B. Validity Of The Statutes-Of-Limitations Evidentiary Hearing
The Shareholders argue that use of evidentiary hearings to resolve factual
questions underlying statutes-of-limitations issues is a violation of the constitutional right
to a jury trial. BPK cites several of our prior decisions as evidence that we "recognize[]
the superior court's ability to act as fact-finder to resolve statute of limitations issues at
an evidentiary hearing." DWT adds that the Shareholders have failed to establish
"compelling reasons" for entirely abandoning pretrial evidentiary hearings.58
56 Williams, 129 P.3d at 432 (quoting Waage, 926 P.2d at 1151).
57 Preblich v. Zorea , 996 P.2d 730, 736 (Alaska 2000) (quoting Breck v.
Moore , 910 P.2d 599, 604 (Alaska 1996)).
58 See McCrary v. Ivanof Bay Vill. , 265 P.3d 337, 340-41 (Alaska 2011):
Our precedent is not lightly set aside. We have repeatedly
held that a party raising a claim controlled by an existing
decision bears a heavy threshold burden of showing
compelling reasons for reconsidering the prior ruling. We
will overrule a prior decision only when clearly convinced
(continued...)
-27- 6804
----------------------- Page 28-----------------------
1. Evidentiary hearings generally
"The purpose of statutes of limitations is to eliminate the injustice which
59
may result from the litigation of stale claims." To facilitate this purpose we have
recognized the propriety of evidentiary hearings to resolve factual issues regarding
60
statutes of limitations. The Shareholders are correct that article I, section 16 of the
Alaska Constitution provides that "[i]n civil cases where the amount in controversy
exceeds [$250], the right of trial by a jury of twelve is preserved to the same extent as
it existed at common law." But "the task of interpreting and applying a statute of
61
limitations traditionally falls within the province of the courts." We again approve the
58 (...continued)
that the rule was originally erroneous or is no longer sound
because of changed conditions, and that more good than harm
would result from a departure from precedent.
(quoting Guerrero ex rel. Guerrero v. Alaska Hous. Fin. Corp., 123 P.3d 966, 982 n.104
(Alaska 2005)) (footnote and internal quotation marks omitted).
59 Pedersen v. Zielski , 822 P.2d 903, 907 (Alaska 1991) (citing Johnson v.
City of Fairbanks, 583 P.2d 181, 187 (Alaska 1978)).
60 Id. at 907 n.4 ("Holding an evidentiary hearing well in advance of trial to
resolve fact questions goes part way toward meeting the early resolution goals of statutes
of limitations. We recommend such a hearing in this case.").
61
Cikan v. ARCO Alaska, Inc., 125 P.3d 335, 339 (Alaska 2005); see also
Ellicott v. Nichols , 7 Gill 85, 96 (Md. 1848) (stating "it is the province of the court
authoritatively to interpret" the facts and determine whether they "take the plaintiff's
claim out of the bar of the statute of limitations"); Sundell v. Town of New London, 409
A.2d 1315, 1320 (N.H. 1979) ("The rule in this State is that a statute of limitations is a
matter of procedure, the interpretation and application of which is traditionally within the
province of the court . . . ." (citation, quotation marks, and internal editing omitted));
Lopez v. Swyer , 300 A.2d 563, 567 (N.J. 1973) ("[T]he question as to the application of
the statute of limitations is ordinarily a legal matter and as such is traditionally within the
(continued...)
-28- 6804
----------------------- Page 29-----------------------
62
use of evidentiary hearings to determine when a cause of action accrued. Specifically
we affirm that when "a factual dispute precludes entry of summary judgment [on a
statute-of-limitations defense] the dispute must ordinarily be resolved by the [superior]
63
court at a preliminary evidentiary hearing in advance of trial."
We acknowledge that in certain circumstances the superior court may
improperly reach the merits of an underlying claim within the evidentiary hearing. For
example, in Williams v. Williams the superior court held an evidentiary hearing and
found it necessary to reach the underlying question of fraud to resolve a statutory tolling
64 Although the court also reached alternative conclusions supporting its result,
question.
we recognized that "addressing the substantive merits of a case in . . . a preliminary
evidentiary hearing can create considerable tension with the . . . right to a jury trial."65
But to the extent the superior court does not address the substantive merits of a case, the
use of evidentiary hearings to decide statutes-of-limitations issues is constitutional.
2. Evidentiary hearing in this case
The Shareholders argue that the superior court made several improper
findings as a result of the evidentiary hearing. Specifically the Shareholders challenge
the court's determination that: (1) the reasonableness of their reliance on Steffen's
61 (...continued)
province of the court.").
62 See, e.g., Egner v. Talbot's, Inc. , 214 P.3d 272, 278 (Alaska 2009); Domke
v. Alyeska Pipeline Serv. Co. , 137 P.3d 295, 303 n.19 (Alaska 2006).
63 Cikan, 125 P.3d at 339 (citing John's Heating Serv. v. Lamb , 46 P.3d 1024,
1033 n.28 (Alaska 2002)).
64 129 P.3d 428, 431 (Alaska 2006).
65 Id. at 431.
-29- 6804
----------------------- Page 30-----------------------
representations "dissipated over time"; and (2) "it should have been apparent to [them]
by mid 1996 that [Steffen] was not going to voluntarily transfer title." The Shareholders
argue for an "inviolate right to jury trial on these issues."
We conclude the superior court properly decided these issues. The court
had before it evidence establishing that the Shareholders had knowledge the Property's
acquisition was an important corporate opportunity, Steffen purchased the Property in
his name, and Steffen repeatedly failed to transfer title to Petro Alaska. The court acted
well within its authority to make factual findings as to when the Shareholders had inquiry
notice of the potential causes of action arising out of Steffen's misappropriation. In
making these findings, the court did not address the merits of any underlying claims
within the evidentiary hearing - the court merely addressed when the Shareholders had
notice of these potential claims and not whether there was any merit to these claims.
C. Attorney-Client Privilege Issues
1. Gefre, Beck, and Keene
The Shareholders argue the superior court erred in ruling they waived their
attorney-client privilege with Keene by asserting the discovery rule and equitable
estoppel in the statutes-of-limitations disputes. The Shareholders argue the court applied
the incorrect standard for finding a waiver of the attorney-client privilege. The
Shareholders suggest the court should have adopted the waiver test established in Rhone-
66
instead of the test established in Hearn v.
Poulenc Rorer Inc. v. Home Indemnity Co. ,
67
Rhay .
Under the Rhone test, the attorney-client privilege is waived only if the
66 32 F.3d 851, 863 (3d Cir. 1994).
67 68 F.R.D. 574, 581 (E.D. Wash. 1975).
-30- 6804
----------------------- Page 31-----------------------
68
litigant directly puts the attorney's advice at issue in the litigation. In other words, the
privilege is waived once a party seeks to avoid or limit liability by showing reliance on
counsel's advice. This test rejects relevance as the standard for waiver because it
undermines the exchange of confidential and candid communications between attorney
69
and client. In contrast, under the Hearn test the attorney-client privilege is waived if:
(1) assertion of the privilege was a result of some affirmative
act, such as filing suit, by the asserting party; (2) through this
affirmative act, the asserting party put the protected
information at issue by making it relevant to the case; and (3)
application of the privilege would have denied the opposing
[70]
party access to information vital to his defense.
The superior court adopted the Hearn test based on our focus on fairness,
71
finding an implied waiver of the attorney-client privilege. The court then concluded
that the Shareholders had "impliedly waived the attorney client privilege with respect to
their communications with [Keene] that relate or pertain to DWT." Accordingly the
court stated DWT could pursue discovery from Gefre, Beck, and Keene concerning what
they knew about Steffen and DWT.
We have previously noted a client may impliedly waive the attorney-client
72
We stated the "purpose of the
privilege by putting discussions with counsel at issue.
68 Rhone-Poulenc Rorer , 32 F.3d at 863.
69 Id. at 864.
70 Hearn , 68 F.R.D. at 581.
71 See Lewis v. State, 565 P.2d 846, 850 n.4 (Alaska 1977) (finding fairness
dictated attorney-client privilege was waived when client filed motion that put into "issue
what advice he did or did not receive from [his attorney]").
72 Id .
-31- 6804
----------------------- Page 32-----------------------
73
rule implying waiver in [such a] situation is essentially fairness to the opposing party."
In addition, "we emphasize[d] that it is not the mere filing of [a] motion, but the actual
placing in issue of confidences covered by the privilege, that waives the attorney-client
74
privilege." Because we continue to believe fairness to the opposing party should be
included in the implied waiver analysis, we adopt the Hearn test.75
Applying the Hearn test, we conclude the superior court did not err in
finding the Shareholders placed their communications with Keene at issue by raising the
discovery rule and estoppel in response to DWT's statutes-of-limitations defenses. The
communications are material to the defenses because the Shareholders claimed they had
no knowledge, either direct or constructive, of DWT's identity or role with regard to
Steffen's conduct. The Shareholders cannot be permitted to thrust their lack of
knowledge into the litigation while simultaneously retaining the attorney-client privilege
to frustrate proof of knowledge that negates the very foundation necessary to their
positions. The superior court correctly found fairness dictated that DWT be permitted
to discover from Gefre, Beck, and Keene what they knew about Steffen and DWT.76
2. Petro Alaska and DWT
The Shareholders also challenge the superior court's denial of a motion to
73 Id.
74 Id.
75 See also RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS 80
(1998) reporter's note cmt. b ("The preferred approach is to require that the client either
permit a fair presentation of the issues raised by the client or protect the right to keep
privileged communications secret by not raising at all an issue whose fair exposition
requires examining the communications.").
76 See League v. Vanice, 374 N.W.2d 849, 855-56 (Neb. 1985) (finding
implied waiver when plaintiff justified noncompliance with statute of limitations by
alleging that delay was caused solely by defendant's concealment of facts).
-32- 6804
----------------------- Page 33-----------------------
waive DWT's attorney-client privilege while DWT simultaneously represented Petro
Alaska and Steffen individually. Specifically the Shareholders request all
communications between DWT and any inside or outside counsel relating to matters
involved in this litigation.
DWT voluntarily produced all pre-litigation documents created internally,
thereby rendering Petro Alaska's claim moot as to internal communications. The
Shareholders' claim regarding communications between DWT and outside counsel is
waived for a failure to adequately brief it - a single conclusory sentence requesting
DWT's communications with outside counsel without citation of any authority providing
for such a remedy is not adequate to put the issue before this court.77
D. Attorney's Fees As Special Damages
The Shareholders argue the superior court incorrectly ruled that a plaintiff
cannot recover attorney's fees incurred in bringing suit as special damages in that suit.
Specifically the Shareholders argue DWT and BPK committed legal malpractice and
fiduciary fraud, causing Gefre and Beck to incur attorney's fees in this litigation.
The general rule is "that attorney's fees for work in the case under review
78
are not recoverable as damages." A prevailing party's attorney's fees are generally
recoverable only as an attorney's fee award under Alaska Civil Rule 82. However it is
77 A.H. v. W.P. , 896 P.2d 240, 243-44 (Alaska 1995) (finding issue waived for
inadequate briefing because "superficial briefing and the lack of citations to any
authority constitutes abandonment of the point on appeal"); Adamson v. Univ. of Alaska,
819 P.2d 886, 889 n.3 (Alaska 1991) ("[W]here a point is given only a cursory statement
in the argument portion of a brief, the point will not considered on appeal.").
78
Sisters of Providence in Wash. v. A.A. Pain Clinic, Inc., 81 P.3d 989, 1008
(Alaska 2003), cited in ASRC Energy Servs. Power & Commc'ns, LLC v. Golden Valley
Elec. Ass'n, Inc., 267 P.3d 1151, 1165 (Alaska 2011); see also RESTATEMENT (SECOND)
OF TORTS 914(1) (1979) ("The damages in a tort action do not ordinarily include
compensation for attorney fees or other expenses of the litigation.").
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also generally recognized that "when the defendant has breached a specific duty to
protect the plaintiff from litigation expenses, the defendant is necessarily liable for those
79
expenses, including attorney fees." "When recovery of a fee award is permitted . . . the
80
fee award is damages, not costs." For example, "where the negligence of a
malpracticing lawyer requires the client to protect her interests by litigating with others;
81
the lawyer is liable for the litigation expenses as consequential damages."
As applicable here, we agree "that a legal malpractice plaintiff may recover
as actual damages the attorney fees incurred as a result of the defendant's malpractice,
so long as the plaintiff can demonstrate she would not have incurred the fees in the
82
absence of the defendant's negligence." Therefore if the Shareholders are successful
on the spoliation and legal malpractice claims on remand, then the fact-finder must
determine what, if any, of their attorney's fees incurred against Steffen would not have
been incurred in the absence of DWT's and BPK's specific wrongdoing, and, thus, are
79 1 D AN B. DOBBS, LAW OF REMEDIES : DAMAGES -EQUITY-RESTITUTION
3.10(3), at 401 (2d ed. 1993) (This "reflect[s] a willingness to award attorney fees to the
plaintiff when the defendant should have protected the plaintiff from litigation or
litigation costs."); see also RESTATEMENT (SECOND) OF TORTS 914(2) ("One who
through the tort of another has been required to act in the protection of his interests by
bringing . . . an action against a third person is entitled to recover reasonable
compensation for . . . attorney fees . . . thereby suffered or incurred in the earlier
action.").
80 DOBBS at 402 (emphasis in original).
81
Id. at 407-08; see also Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer ,
867 N.E.2d 385, 388 (N.Y. 2007) ("A plaintiff's damages [in a legal malpractice case]
may include 'litigation expenses incurred in an attempt to avoid, minimize, or reduce the
damage caused by the attorney's wrongful conduct.' " (quoting DePinto v. Rosenthal &
Curry, 655 N.Y.S.2d 102, 102 (N.Y. App. Div. 1997))).
82 Nettleton v. Stogsdill , 899 N.E.2d 1252, 1261 (Ill. App. 2008).
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recoverable as damages. But the Shareholders may not recover as special damages
attorney's fees incurred in asserting claims against DWT and BPK.
E. Other Issues
The Shareholders argue the superior court erred in denying a motion
prohibiting DWT from arguing comparative fault as to the fiduciary fraud claim. The
Shareholders also argue the court erred in granting DWT's motion for an order that
DWT and BPK should not be jointly and severally liable for the conspiracy and aiding
and abetting causes of action. Because the underlying claims are time-barred, we decline
to address these issues.
The Shareholders also contend the superior court incorrectly dismissed the
claim that DWT must disgorge fees because of alleged ethical violations. The court
dismissed the claim because it found the Shareholders had adequate and complete legal
remedies available. Because the Shareholders provide merely a single conclusory
sentence without further discussion or citation of any authority, we find the issue waived
for a failure to adequately brief.83
On cross-appeal, BPK argues the superior court erred in refusing to
recognize its October 2008 offer of judgment under Alaska Civil Rule 68. Because we
are remanding the spoliation claim against BPK to the superior court and BPK's
judgment against the Shareholders must be vacated, we decline to address the Rule 68
issue.
V. CONCLUSION
For the reasons stated above, we VACATE DWT's and BPK's judgments
and REMAND for further proceedings consistent with the opinion.
83 See note 77, above.
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