Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions

Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.


You can search the entire site. or go to the recent opinions, or the chronological or subject indices. State, Dept. of Transportation & Public Facilities v. Alaska Laser Wash, Inc. (10/21/2016) sp-7129

State, Dept. of Transportation & Public Facilities v. Alaska Laser Wash, Inc. (10/21/2016) sp-7129

           Notice:   This opinion is subject to correction before publication in the P                    ACIFIC  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  



                       THE SUPREME COURT OF THE STATE OF ALASKA                                     

STATE  OF  ALASKA,                                              )  

DEPARTMENT  OF                                                  )          Supreme  Court  Nos.  S-15380/15649  

TRANSPORTATION  AND                                             )  

PUBLIC  FACILITIES,                                             )          Superior  Court  No.  3AN-09-11426  CI   


                     Appellant,                                 )         O P I N I O N  



           v.                                                   )         No.  7129  -  October  21,  2016  


ALASKA  LASER  WASH,  INC.,                                     )


     ALASKA  CORPORATION,                                       )


                     Appellee.                                  )


_______________________________ )


                     Appeal from the Superior Court of the State of Alaska, Third  


                     Judicial District, Anchorage, Eric A. Aarseth, Judge.  


                     Appearances: Dario Borghesan, Assistant Attorney General,  


                     Dana Burke, Senior Assistant Attorney General, Anchorage,  


                     and  Michael  C.  Geraghty,  Attorney  General,  Juneau,  for  

                     Appellant.  Stephen M. Dodge, Austin, Texas and Kevin T.  

                                                           for  Appellee.    

                     Fitzgerald, Anchorage,  

                     Before:    Stowers,   Chief   Justice,  Fabe,   and  Bolger,   Justices.  

                      [Winfree  and  Maassen,  Justices,  not  participating.]  

                     STOWERS,  Chief  Justice.  

                     FABE,  Justice,  dissenting  in  part.  


                     The  State  of  Alaska  and  the  owner  of  a  car  wash  reached  an  agreement  for  

----------------------- Page 2-----------------------

the State to acquire the car wash site as part of a highway improvement project.  After  


the State acquired the site, the owner elected not to relocate the car wash.  The owner  


then brought an inverse condemnation suit against the State, claiming business damages  


resulting from the State's acquisition.   At the close of a jury trial the superior court  


denied the State's motion for a directed verdict; the jury awarded the owner $1.79  


million in damages and the court awarded attorney's fees and costs.  The State appeals,  


arguing that the owner's claimed damages are not compensable because it was feasible  


for the owner to relocate the car wash after the State acquired the original site. We agree  


with the State that feasibility is the correct standard for analyzing the owner's decision  


not to relocate when deciding whether he is entitled to business damages.  We reverse  


the superior court's denial of the State's motion for directed verdict, vacate the attorney's  


fee  and  costs  awards,  and  remand  for  reconsideration  of  prevailing  party  status,  


attorney's fees, and costs.  




          A.        Facts  


                    1.        Trefry forms and expands Alaska Laser Wash.  


                    In 1995 George Trefry formed Alaska Laser Wash, Inc.; in 1996 he left the  


practice of law to build his first Alaska Laser Wash car wash near the intersection of  


Spenard Road and Minnesota Avenue in Anchorage. In 1998 Trefry opened another car  


wash on Fifth Avenue; this location included four touchless car wash bays, an espresso  


shop, a water store, storage, and offices.  And in 2004 Trefry opened a six-bay car wash  


in South Anchorage near the intersection of Old Seward Highway and O'Malley Road.  


Alaska Laser Wash was the first touchless car wash in Alaska.   However, by 2004  


Anchorage had 41 touchless car wash bays, 14 of which Trefry owned.  By 2010 there  


were 65 touchless car wash bays in the city.  


                    Alaska Laser Wash was an integrated car wash business, and Trefry chose  

                                                               -2-                                                        7129

----------------------- Page 3-----------------------


the three Alaska Laser Wash locations to maximize his company's coverage of the city  


and customer convenience, based on a study of demographics and traffic patterns. Each  


Alaska Laser Wash site was electronically linked to the others, such that a customer  


could purchase a "WashCard" or "Laser Wash Token" offsite or at any Alaska Laser  


Wash facility for use at any Alaska Laser Wash location. Each location depended on the  


others  to  generate  sales,  and  advertising  at  one  location  often  resulted  in  sales  of  


WashCards and Laser Wash Tokens benefitting the other locations. Alaska Laser Wash  


also enjoyed other economies of scale by using shared personnel, storage, parts, and  


other expense items.  By 2004 technological advances allowed Alaska Laser Wash to  


offer synergized car wash services throughout the city, meaning that customers could  


access any of Alaska Laser Wash's 14 bays 24 hours a day, seven days a week.  Alaska  


Laser Wash also allowed customers to track and pay for washes and generate usage and  


tax reports online, which reduced customers' - particularly businesses', fleet owners',  


and government agencies' - drive times, administrative expenses, and related costs.  


Alaska Laser Wash was the only car wash business in Anchorage to hire a full-time sales  


and marketing director.  


                    Trefry claimed that the Fifth Avenue car wash was Alaska Laser Wash's  


most  important  location  and  that  it  contributed  nearly  40%  of  the  company's  net  


operating income.   Trefry further claimed that the Fifth Avenue car wash was ideal  


because  Fifth  Avenue  was  heavily  trafficked  by  daily  commuters  and  because  the  


location was near a prime business district, military bases, and multiple car dealerships.  


The Fifth Avenue car wash was also highly visible and accessible to traffic traveling in  


both directions on the street.  

                                                               -3-                                                         7129

----------------------- Page 4-----------------------

                                                                             2.                                    The State acquires Alaska Laser Wash's Fifth Avenue car wash.                                                                                                                                                                                                                                                                                             

                                                                             In March 2006 the State notified Trefry that it intended to acquire the Fifth                                                                                                                                                                                                                                                                                                                         

Avenue car wash as part of its Glenn Highway improvement project. Trefry asserted that                                                                                                                                                                                                                                                                                                                                                                                                    

this announcement "had a profound and dramatic effect" on Alaska Laser Wash:                                                                                                                                                                                                                                                                                                                                                                                                            his  

 company halted its business and promotional plans; eliminated its sales and marketing                                                                                                                                                                                                                                                                                                                                                              

 director position; abandoned its expansion plans; faced high costs and lower margins                                                                                                                                                                                                                                                                                                                                                                                                    due  

to lost economies of scale and increasing operational expenses; lost sales, market share,                                                                                                                                                                                                                                                                                                                                                                                   

 and profitability; and suffered business damages.                                                                                                                                                                                

                                                                             In September 2006, after having the site appraised, the State offered Trefry                                                                                                                                                                                                                                                                                                                 

 $3.45 million for the Fifth Avenue car wash. This valuation used an "income approach"                                                                                                                                                                                                                                                                                                                                                             

to approximate the Fifth Avenue car wash's value, an approach that estimates value                                                                                                                                                                                                                                                                                                                                                                                           

                                                                                                                                                                                                                                                                                                                                                             1          This valuation included  

based on the anticipated future revenue stream of a property.                                                                                                                                                                                                                                                                                                                                                                                               

tangible assets, such as the land, building, furniture, and equipment, as well as intangible  


 assets, such as the workforce, patents, and economic profits.  


                                                                             In October 2006 Trefry counteroffered to sell the Fifth Avenue car wash  


 for $5.85 million, contending that the State's offer incorrectly appraised both actual  


 income and capitalization rates due to certain unique aspects of Alaska Laser Wash.  In  


                                       1                                     The   income   approach   "is   concerned   with   the   present   worth   of   future  

benefits from the property" and "arrives at present value by discounting or 'capitalizing'                                                                                                                                                                                                                                                                                                                                        

the future income which could be derived from the property."                                                                                                                                                                                                                                                                                                        Dash v. State                                                                     , 491 P.2d                    

  1069, 1071 (Alaska 1971).                                                                                                                                     "The income capitalization method involves three steps:                                                                                                                                                                                                                                                                                             

 (1)  an estimate of the income which the property is capable of producing, including both                                                                                                                                                                                                                                                                                                                                                                                           

periodic income and the income to be derived from future sale of the property; (2) an                                                                                                                                                                                                                                                                                                                                                                                                           

 estimate of the rate of return (capitalization rate) an investor would require in order to                                                                                                                                                                                               

 induce him to make an investment with the risk and lack of liquidity of an equity interest                                                                                                                                                                                                                                                                                                                                                                         

 in the particular property; (3) an application of this capitalization rate to the estimated                                                                                                                                                                                                                                                                                                                                                           

 income to derive the present value of the estimated income."                                                                                                                                                                                                                                                                                          Horan v. Kenai Peninsula                                                                     

Borough Bd. of Equalization                                                                                                                                        , 247 P.3d 990, 995 (Alaska 2011) (quoting                                                                                                                                                                                                         Dash, 491 P.2d                                                

 at 1071).   

                                                                                                                                                                                                                                                -4-                                                                                                                                                                                                                                7129

----------------------- Page 5-----------------------

this counteroffer Trefry reserved the right to pursue business damages that the State had                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

previously refused to consider or evaluate, particularly damages to Alaska Laser Wash's                                                                                                                                                                                                                                                                                                                                                                                                                                                   

 other properties, incidental losses, and temporary lost profits.                                                                                                                                                                                                                                                                                                                                                   The State advised Trefry                                                                                                     

that it would not consider an offer containing a reservation of rights.                                                                                                                                                                                                                                                                                                                                                                                              Trefry then made                                                                  

 an alternative counteroffer without reservation in the amount of $7,153,450.                                                                                                                                                                                                                                                                                                                                                           

                                                                                         In January 2007 Trefry spoke with the State's acquisition agent and agreed                                                                                                                                                                                                                                                                                                                                                                            

to accept $5 million for the property.                                                                                                                                                                                                                 The State's acquisition agent recommended that   

the State purchase the property for this price, explaining that the State could justify the                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

higher price by some of the adjustments Trefry discussed in his counteroffer.                                                                                                                                                                                                                                                                                                                                                                                                                                                          After a   

 further   dispute   as   to   whether   the   State   would   pay   for   the   storage,   relocation,   and  

reinstallation of fixtures on the property, the parties revised the sale price to $5.36                                                                                                                                                                                                                                                                                                                                                                                                                                                            

million in April 2007.                                                                                                                             The State prepared a report on the transaction and indicated that                                                                                                                                                                                                                                                                                                                                              

the $1.9 million price difference between the State's initial offer and the agreed sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

price was an "administrative settlement."                                                                                                                                                      

                                                                                         The parties drafted a Memorandum of Agreement for this transaction in                                                                                                                                                                                                                                                                                                                                                                                                               

April 2007 and approved the memorandumthe                                                                                                                                                                                                                                                                       following month. This                                                                                                                                  memorandumdid   

not reserve the right to sue for business damages, but Trefry asserted that right in a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

 separate letter                                                                                 sent on the date he signed                                                                                                                                                                    the memorandum.                                                                                                                          Of   the   $5.36   million  

purchase price, $1.44 million went to the bank to pay off the mortgage on the property,                                                                                                                                                                                                                                                                                                                                                                                                                                        

 and Trefry kept the remaining $3.92 million.                                                                                                                                                                                                      

                                                                                         3.                                          Trefry decides not to open a new Alaska Laser Wash location.                                                                                                                                                                                                                                                                                                                            

                                                                                         During the                                                            acquisition process, the                                                                                                                                   Stateinformed Trefry                                                                                                                           ofthe benefits the                                                                             

 State offers owners of condemned properties to help them move their business to a new                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

                                                                                                                                                                                                                                                                                      -5-                                                                                                                                                                                                                                                                    7129

----------------------- Page 6-----------------------


location.   Trefry accepted a $20,000 lump sum relocation payment instead of relocation                                                                                                                                                                                                                                                                                                                                                                                                 

assistance and reimbursement of actual moving expenses.                                                                                                                                                                                                                                                                                                           But despite finding available                                                                                               

 sites correctly zoned for car washes, having the funds to build a car wash on one of those                                                                                                                                                                                                                                                                                                                                                                                                                          

 sites, and expressing confidence that Alaska Laser Wash would prosper at alternate                                                                                                                                                                                                                                                                                                                                                                                                           

locations, Trefry decided not to open a new location after receiving the funds from the                                                                                                                                                                                                                                                                                                                                                                                                                                           

 State. Trefry claimed that there was no single equivalent substitute for the Fifth Avenue                                                                                                                                                                                                                                                                                                                                                                                                           

car wash; he asserted that he would need to open at least two locations to replace the                                                                                                                                                                                                                                                                                                                                                                                                                                           

economic   benefits  of   the   Fifth   Avenue   car   wash,   that   each   location   would   cost  

approximately $3.5 million, that he lacked these funds, that it would take at least three                                                                                                                                                                                                                                                                                                                                                                                                                             

years to open the alternate locations due to construction cycles, and that the litigation                                                                                                                                                                                                                                                                                                                                                                                                   

related to this case would tie up financial and other resources for the foreseeable future.                                                                                                                                                                                                                                                                                                                                                                                                                 

                                                                                   4.                                       Trefry sells Alaska Laser Wash to the Laudon Group                                                                                                                                                                                                                                                                                                                .  

                                                                                   Trefry instead decided to leave the car wash business altogether, and he                                                                                                                                                                                                                                                                                                                                                                          

 sold the entire Alaska Laser Wash business to the Laudon Group in March 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                           The  

Laudon Group paid Trefry $6.95 million for the business; Trefry contended that this sum                                                                                                                                                                                                                                                                                                                                                                                                                                     

did not include any of the business damages he claimed in this action.                                                                                                                                                                                                                                                                                                                                                                                 Trefry's profit   

 from the transaction was $2.95 million.                                                                                                                                                                                                                  The new owners proceeded to build another                                                                                                                                                                                                  

Alaska Laser Wash location on the Fifth Avenue location that Trefry had considered as                                                                                                                                                                                                                                                                                                                                                                                                                                                    

a replacement for his original Fifth Avenue car wash.  The new owners also built new   

                                         2                                         Federal   regulations   require   the   State   to   provide   these   benefits   in   all  

 federally-funded transportation projects.                                                                                                                                                                                                                    49 C.F.R.  24.301, 24.305 (2016).                                                                                                                                                                                                          These  

tax-free benefits include reimbursement for (1) the cost of using a professional mover or                                                                                                                                                                                                                                                                                                                                                                                                                                               

the cost of moving the business; (2) up to twelve months of storage costs and insurance;                                                                                                                                                                                                                                                                                                                                                                                              

 (3)  time spent searching for replacement property and obtaining permits, up to $2,500;                                                                                                                                                                                                                                                                                                                                                                                                              

 (4)  professional services to help determine the feasibility of potential replacement sites;                                                                                                                                                                                                                                                                                                                                                                                                                        

 (5)  professional services to help plan the move and install property at the new site; and                                                                                                                                                                                                                                                                                                                                                                                                                                   

 (6)  repairs, improvements, or modifications to the replacement site, up to $10,000.                                                                                                                                                                                                                                                                                                                                                                                 

                                                                                                                                                                                                                                                                   -6-                                                                                                                                                                                                                                                   7129

----------------------- Page 7-----------------------

car wash locations on three other sites that Trefry had considered.  


          B.        Proceedings  

                    1.        Trefry files suit against the State.  


                    In October 2009 Trefry filed an inverse condemnation claim against the  


State in the name of Alaska Laser Wash. Trefry argued that the State's acquisition of the  


Fifth Avenue car wash led to "business interruption and uncompensated losses and  


damages, including, but not limited to, temporary lost profits, lost business profits, lost  


business opportunities and value, lost goodwill, lost going concern value[,] and other  


consequential  and  incidental  damages."                           Trefry  requested  declaratory  judgment,  


compensatory damages, pre- and post-judgment interest, and attorney's fees and costs.  


                    2.        The State moves for summary judgment.  


                    The State moved for summary judgment on three grounds.  First, the State  


argued that it did not take Alaska Laser Wash's Spenard or Old Seward locations and,  


therefore, Trefry couldnot recover losses pertaining to thoselocations. Second, it argued  


that because Trefry feasibly could have relocated the Fifth Avenue car wash, he could  


not  claim  lost  goodwill,  lost  going  concern  value,  temporary  lost  profits,  or  other  


incidental  damages.               Third,  it  argued  that  the  $5.36  million  settlement  included  


compensation for lost profits, that the $6.95 million sale of the other locations included  


compensation for some of the same elements that Trefry sought to recover in his lawsuit,  


and  that  awarding  further  business  damages  would  therefore  amount  to  double  



                    The superior court denied the State's motion for summary judgment. First,  


the court held that, looking at Alaska Laser Wash "as a whole," there was a genuine issue  


of  material  fact  whether  the  business  suffered  losses  -  that  is,  whether  the  State  


damaged "the business as a whole" - when it condemned the Fifth Avenue car wash.  


But the court also explained that Trefry could not recover "damages related solely to his  


                                                               -7-                                                         7129

----------------------- Page 8-----------------------


geographically  separate  and  non-unified  Spenard  and  South  Anchorage  facilities."  


Second,  the  court  held  that  the  matter  of  relocation  was  essentially  a  question  of  


mitigation of damages and that there was a genuine issue of material fact whether it was  


reasonable for Trefry to relocate the Fifth Avenue car wash. Third, the court rejected the  


State's double compensation argument, finding that there was a genuine issue of material  


fact whether the sale price of the Spenard and Old Seward locations was lower than it  


would have been had the State not condemned the Fifth Avenue car wash.  


                    3.         The case proceeds to trial.  


                     The case proceeded to trial in 2011. Shortly after the trial commenced, one  


of  Alaska  Laser  Wash's  attorneys  became  ill,  and  the  court  declared  a  mistrial.  


Following the mistrial, the State again moved for summary judgment, but the superior  


court denied that motion citing genuine issues of material fact.  


                     In 2013 a new trial commenced before a different judge, and the State filed  


a third motion for summary judgment.   The superior court also denied that motion,  


holding that Trefry had provided sufficient evidence that "the condemnation of the Fifth  


Avenue [car wash] potentially diminished the . . . remaining property interests" and that,  


therefore, it was still in dispute whether Alaska Laser Wash had "suffered a compensable  


taking to its 'business as a whole.' "  The court found that Trefry's affidavit and his  


expert's  projections  that  the  acquisition  of  the  Fifth  Avenue  car  wash  "potentially  


diminished the value of Laser Wash's remaining property interests" provided sufficient  


evidence to send to the jury the question whether there was a compensable taking of the  


"business as a whole."  


                    During  these  proceedings  the  superior  court  invited  the  parties  to  file  


cross-motions regarding the burden of proof applied to the relocation issue.  The State  


argued that the burden "falls on the business owner to 'show relocation to be impossible,  


or at least, impractical,' " in essence a feasability standard.  Trefry argued that the State  

                                                                -8-                                                          7129

----------------------- Page 9-----------------------


must  show  that  the  business  owner  unreasonably  failed  to  mitigate  damages,  a  


reasonableness standard.  The superior court agreed with Trefry that a business owner  


"has the duty to mitigate its business loss damages arising incident to the condemnation  


of its real property if, but only if, it is reasonable to do so." The superior court also ruled  


that the "burden of proving mitigation or the failure to mitigate falls on the State."  At  


trial, the superior court instructed the jury that Alaska Laser Wash was entitled to recover  


damages unless the State showed that some or all of the damages "could have been  


avoided  with  reasonable  efforts  and  without  undue  risk,  expense,  hardship,  or  



                    Testimony duringthe24-daytrial focused on (1) whether Trefry couldhave  


relocated his car wash to a new site; (2) whether the State's acquisition of the Fifth  


Avenue car wash caused financial losses; and (3) what the State's $5.36 million payment  


for Trefry's Fifth Avenue car wash encompassed.  


                    On the first issue, Trefry conceded that the $3.9 million in cash he netted  


from the sale of the Fifth Avenue car wash was enough to enable him to obtain the  


financing necessary to build another car wash. He also conceded that there were several  


parcels of land available that were correctly zoned for car washes and that he found many  


suitable places to build a car wash.  


                    On  the  second  issue,  Trefry's  witnesses  testified  about  the  premium  


location of the original Fifth Avenue car wash.  But the State's appraiser, Jerry Smith,  


testified that the new Fifth Avenue car wash was comparable to the original site.  Trefry  


also relied on testimony from Susan Spyker, an expert in business valuation, to estimate  


business damages resulting from the loss of the original Fifth Avenue car wash. Spyker  


estimated  that Alaska Laser  Wash  lost $5.38 million  due to the State's taking.                                               In  


contrast, the State's business valuation expert, Robert Meyer, concluded that Alaska  


Laser Wash did not incur any loss of business value as a result of the State's acquisition  

                                                                -9-                                                         7129

----------------------- Page 10-----------------------

of the Fifth Avenue car wash.                                                       He also testified that each of the remaining Alaska Laser                                                                                      

Wash locations experienced an increase in revenue after the State's acquisition of the                                                                                                                                                   

Fifth Avenue car wash.                            

                                      On the third issue regarding what the State's $5.36 million payment for the                                                                                                                         

Fifth Avenue car wash encompassed, Smith testified that the State's original appraisal                                                                            

that formed the basis for the State's initial $3.45 million offer was based on an income                                                                                                                                     

approach to valuation that included both tangible and intangible assets, such as the                                                                                                                                                     

workforce and economic profits.                                                              Smith testified that the State's eventual $5.36 million                                                                          

payment was "exorbitantly high" and that the capitalization rate used in reaching that                                                                                                                                                 

                                                                                                                                                          3  Robert Wright, also explained  

sum was inappropriate.                                             The State's right of way chief,                                                                                                                     

that the State paid $1.9 million above its original $3.45 million offer because the State  


wanted to avoid further delay in its expansion project and did not want to risk losing a  


construction season.  


                                                                                                                                                                                                   4 but the superior  

                                     The State moved for a directed verdict at the close of trial,                                                                                                                         


court denied its motion.  The jury then deliberated and entered a special verdict finding  


that:  (1) the State's acquisition of the Fifth Avenue car wash damaged the business as  


a  whole;  (2)  the  damage  to  Alaska  Laser  Wash's  business  as  a  whole  resulted  in  


measurable loss; (3) the State owed just compensation to Alaska Laser Wash in the  


amount of $1,793,450; (4) the parties did not agree that business damages were included  


in the original $5.36 million payment; and (5) Alaska Laser Wash did not unreasonably  


                   3                 The   State's   right  of   way   chief   is   the   "supervisor   of   the   appraisal,  

acquisition,   and   relocation   section   of   the   Department   of   Transportation   and   Public  


                   4                 The State argued that relocation was feasible. The State specifically argued  


that Trefry's testimony that "it would take two locations to make what he could have  


made at [the] Fifth [Avenue site]" was "not supported by any kind of business analysis,"  


was "pure speculation," and was "not even helpful to the jury."  


                                                                                                                   -10-                                                                                                             7129

----------------------- Page 11-----------------------

fail to lessen its damages by refusing to relocate.  


                    4.        Alaska Laser Wash moves for attorney's fees and costs.  


                    Alaska Laser Wash moved for an award of attorney's fees against the State,  


including fees for legal services provided by Kevin Fitzgerald, Stephen Dodge, and  


George Trefry.  Dodge, who lives in Texas, served as Alaska Laser Wash's counsel for  


both the first and second trials.  Fitzgerald joined the case after Dodge's illness resulted  


in the mistrial of the first trial.  Trefry, who was both the owner of Alaska Laser Wash  


and a lawyer in good standing with the Alaska Bar, sat through both trials and claimed  


he  acted  as  counsel  through  his  participation  in  the  case.                             Trefry  also  sought  an  


assessment of $281,867 in costs incurred throughout the proceedings.  


                    The superior court awarded $633,935 in attorney's fees and $135,420 in  


costs. The court's award included only the attorney's fees and costs incurred through the  


first trial; it excluded fees and costs incurred after the first trial and the fees Trefry sought  


for his own time.  The court denied various other costs, including costs for Dodge's  


travel between Texas and Alaska; accounting costs it deemed duplicative; costs for the  


work of an employee performed "within the scope of her regular duties"; and some  


process server and transcript preparation costs incurred after the first trial. The court did  


award $101,885 in costs for 403 hours of time spent by Alaska Laser Wash's accounting  



                    5.        The State and Alaska Laser Wash appeal to this court.  


                    The State appeals the jury verdict and various rulings made by the superior  


court.  Alaska Laser Wash cross-appeals the court's adverse rulings on attorney's fees  


and costs.  These two appeals have been consolidated.  




                    "Whether the superior court applied the correct legal standard is a question  


of law that we review de novo, 'adopting the rule of law that is most persuasive in light  


                                                              -11-                                                         7129

----------------------- Page 12-----------------------

of precedent, reason[,] and policy.' "                          5  


                       We review the denial of a motion for a directed verdict for "whether the  


evidence, and all reasonable inferences which may be drawn from the evidence, viewed  


in the light most favorable to the non-moving party, permits room for diversity of  



opinion among reasonable jurors." 

IV.	        DISCUSSION  


            A.	        A  Business  Owner  Whose  Property  Is  Taken  By  The  State  May  


                       Recover Business Damages So Long As It Was Not Feasible For The  


                       Business To Relocate.  


                       Both parties agree that the business damages Trefry seeks in this eminent  

                                                                                                 7   Generally, a business owner  


domain case fall into the category of "special damages." 

may  not  recover  special  damages  unless  he  shows  with  "reasonable  certainty"  the  


amount of losses that are a "direct result of the [S]tate's taking."8   Determining whether  


Trefry's losses are a direct result of the State's taking requires us to clarify the legal  


standard to apply to Trefry's decision not to relocate.  The State argues that Trefry may  


recover business damages only if he proves that relocation of the Fifth Avenue car wash  


            5          Rego v. Rego            , 259 P.3d 447, 452 (Alaska 2011) (quoting                                      McQuade v.   

McQuade, 901 P.2d 421, 423 n.3 (Alaska 1995)).                            

            6          Cameron v. Chang-Craft, 251 P.3d 1008, 1017 (Alaska 2011) (quoting  


City of Delta Junction v. Mack Trucks, Inc., 670 P.2d 1128, 1130 (Alaska 1983)).  


            7          Special damages are losses that "do not necessarily or even usually flow  


from  the  condemnation  of  land."                                 Triangle,  Inc.  v.  State,  632  P.2d  965,  974  


(Alaska 1981) (Connor, J., dissenting in part).  


            8          State v. Hammer, 550 P.2d 820, 827 (Alaska 1976) ("Since such loss of  


profits is an item of special damages, the condemnee has the burden of proving by a  


preponderance of the evidence the amount of profits lost as a direct result of the state's  


taking; such proof must meet the requirement of reasonable certainty as indicated."  


(footnote omitted)).  


                                                                       -12-	                                                                 7129

----------------------- Page 13-----------------------

was not feasible.                          Trefry, in contrast, argues that a business has a duty to mitigate its                                                                                            

damages if it is reasonable to do so; he contends that Alaska Laser Wash may recover                                                                                                

special damages unless the State proves it was not reasonable to relocate.                                                                                                         The superior   

court applied Trefry's reasonableness standard.                                               

                                Wehavenot explicitly determined                                                    whether afeasibility                             or areasonableness     

(mitigation)   standard   should   apply   when   analyzing   a   property   owner's   relocation  

decision in determining an award of special damages, such as business damages.                                                                                                                       But a   

leading treatise on eminent domain states, "In jurisdictions permitting compensation for                                                                                                                    

loss of goodwill, it is generally required that the business owner show relocation to be                                                                                                                     

                                                                                          9   And cases from other jurisdictions also suggest  

impossible or at least impracticable."                                                                                                                                                          

that the State's taking directly results in business damages only if no other feasible  


location exists. The Michigan Court of Appeals held that the recovery of going concern  


value "depend[s] on the transferability of that business to another location" because "[i]f  


the business can be transferred, nothing is taken and compensation is therefore not  


                         10    The Michigan Court of Appeals has applied this doctrine in other cases as  


well, allowing business owners to recover for lost goodwill when relocation was not  


feasible and refusing to compensate when relocation was feasible.11  


                                                                                                                                                                             The Minnesota  

                9                8A N         ICHOLS  ON  EMINENT  DOMAIN   G29.03[3][b] (3d ed. 1964).                                                                         



                                 City  of  Detroit  v.  Michael's  Prescriptions,  373  N.W.2d  219,  224  


(Mich. App. 1985).  

                11              See, e.g.,  City of Lansing v. Wery, 242 N.W.2d 51, 54-55 (Mich. App.  


 1976) (permitting a hamburger shop to recover lost goodwill because no "remotely  


comparable" location was available when the shop depended greatly on its walking  


distance  from  the  city's  commercial  center);  City  of  Detroit  v.  Whalings,  Inc.,  


202 N.W.2d 816, 820 (Mich. App. 1972) (declining to allow the owner of a men's  


clothing store to recover lost goodwill because its value did not "derive primarily from  


its location; it [did] not enjoy  a monopoly,  and  its customers [were]  not  a  captive  


                                                                                                    -13-                                                                                              7129

----------------------- Page 14-----------------------

Supreme Court applied similar reasoning when it reversed an award of lost goodwill to                                                                     

a   restaurant   owner   who   did   not   successfully   demonstrate   that   relocation   was   not  



possible.            The Minnesota Supreme Court reasoned that "[u]nder circumstances where  


the business can potentially be relocated, the condemnation has only taken the physical  



property and has not prevented the business owner fromactually moving his business." 


The Nevada Supreme Court has also held that when a business is tied to the condemned  


location so that it is impossible to relocate without destroying the entire value of the  



business, the owner can claim lost goodwill and going concern value. 


                        The State agrees with this line of reasoning, arguing that a business owner  


who refuses to relocate should be able to collect business damages only when relocation  


is not feasible.  The State specifically argues that when a business owner may feasibly  


relocate, the State's condemnation of the property does not directly result in any loss of  


goodwill or going concern value because the relocated business would retain that value.  


When it is feasible to relocate but the business owner chooses not to do so, any loss of  


goodwill and going concern value would then result from the business owner's choice  


not to relocate rather than the State's taking.  Under this circumstance the owner would  


have  been  fully  compensated  for  the  loss  of  his  property  in  the  eminent  domain  


            11          (...continued)  


            12          Hous. & Redevelopment Auth. of St. Paul v. Lambrecht                                               , 663 N.W.2d 541,         

549 (Minn. 2003).     

            13          Id. at 548.  


            14          State v. Cowan, 103 P.3d 1, 4 (Nev. 2004) (holding that a gas station owner  


can recover lost goodwill for hiscondemned businessbecausehe presented evidence that  


oil companies had stopped leasing new gas station franchises in his area).  


                                                                           -14-                                                                    7129

----------------------- Page 15-----------------------

                                                         In contrast, Trefry asserts that the feasibility test should not apply in Alaska                                                                                                                                                                                                        

 and that we should instead consider a business owner's relocation decision under the                                                                                                                                                                                                                                               

 same standard that we apply when analyzing questions involving mitigation of damages.                                                                                                                                                                                                                                                

Under this standard, Trefry argues that "Alaska Laser Wash had a duty to mitigate its                                                                                                                                                                                                                                                                              

damages, but that duty arose only if it was reasonable to do so" and that Alaska Laser                                                                                                                                                                          

Wash could recover damages if it were not reasonable to relocate.                                                                                                                                                                                                                     Trefry contends that                                                   

there are distinct differences between Alaska and the other jurisdictions adopting the                                                                                                                                                                                                                                                                         

 feasibility standard that wecitehere. Trefry                                                                                                                                        claims that these differences makeprecedent   

 from these other jurisdictions inapplicable with regard to this issue. Trefry explains that                                                                                                                                                                                                                                                                  

in those states the "general rule" is that the State is not required to pay any claim for                                                                                                                                                                                                                                                                       

business damages arising from the taking of the land where the business is located but                                                                                                                                                                                        

that those states have carved out an exception to this general rule, permitting business                                                                                                                                                                                                                                                 

                                                                                                                                                                                                                                                                                    15           Trefry argues that  

 owners to collect business damages if relocation is not feasible.                                                                                                                                                                                                                                                                                           

because we have rejected outright the "general rule" that the State is not required to pay  


 any claim for business damages arising from the taking of the land where a business is  


located,16  we cannot, by extension, adopt the exception to that general rule.  


                                                         We agree with the State and the rationale of the Minnesota, Michigan, and  


Nevada courts cited above that feasibility, rather than reasonableness, is the correct  


 standard for analyzing whether a business owner may recover business-loss damages  


when the State condemns the business owner's property. And we disagree with Trefry's  


                             15                          See, e.g.                         ,  Michael's Prescriptions                                                                                , 373 N.W.2d at 219;                                                                  City of Minneapolis           

v.  Schutt, 256 N.W.2d 260, 263 (Minn. 1977) (recognizing an exception only when a                                                                                                                                                                                                                                                                                      

business can show that its going concern value will be destroyed and the business cannot                                                                                                                                                                                                                                                         

be relocated);                                             Cowan, 103 P.3d at 4 (recognizing an exception when the condemnation                                                                                                                                                                                  

results in the destruction of a business because it cannot be relocated).                                                                                                                                                                                  

                             16                          State v. Hammer, 550 P.2d 820, 827 (Alaska 1976).  


                                                                                                                                                                               -15-                                                                                                                                                                      7129

----------------------- Page 16-----------------------

 counterargument that the precedent from other jurisdictions we cite here is inapplicable.                                                                                                                                                                                                             

 We view these other jurisdictions' decisions to adopt the feasibility standard                                                                                                                                                                                                  as an  

 independent line                                        of reasoning explaining howcourts in those other jurisdictions consider                                                                                                                                       

 relocation in                                the context of an                                               award   of business damages.                                                                           Even   though   in   those  

jurisdictions that line of reasoning serves as an exception to a general rule holding that                                                                                                                                                                                            

 the government need not pay any claim for business damages arising from the taking of                                                                                                                                                                                                      

 the land where the business is located, a rule which we have not adopted.                                                                                                                                                                          Trefry fails to                          

 offer any persuasive support for his contention that we are prohibited from adopting that                                                                                                                                                                                             

 independent line of reasoning.                                                                          

                                              We hold that a business owner may recover business damages when the                                                                                                                                                                        

 State condemns the business only if it is not feasible for the business owner to relocate;                                                                                                                                                                           

 if it is not feasible for a business owner to relocate, the State's taking is "reasonabl[y]                                                                                                                                                 


 certain[]" to have directly damaged the value of the business, requiring compensation.                                                                                                                                                                                                                

 The superior court concluded that a business owner "is only required to relocate when  


 it is reasonable to do so."  We reject the superior court's approach and hold that the  


 superior court applied the wrong standard in the context of awarding business damages  


 when analyzing Trefry's decision not to relocate.  


                       B.                     It Was Error To Deny The State's Motion For A Directed Verdict.  


                                              The State argues that it should have prevailed on its motion for a directed  


 verdict after the second trial because "it was undisputed, before and after trial, that it was  


 technically feasible and commercially viable for Trefry to re-open [the] car wash."  We  


 review the denial of a motion for directed verdict for "whether the evidence, and all  


 reasonable inferences which may be drawn from the evidence, viewed in the light most  


 favorable  to  the  non-moving  party,  permits  room  for  diversity  of  opinion  among  


                       17                    Id .  

                                                                                                                                           -16-                                                                                                                                                  7129  

----------------------- Page 17-----------------------

reasonable jurors."              18  


                       Evidence presented at trial included Trefry's admission that he probably  


could have obtained financing to build another car wash at a different location with the  


$3.9 million in cash he netted from the State's acquisition of the Fifth Avenue car wash;  


Trefry's testimony that there was plenty of land in Anchorage correctly zoned for car  


washes; Trefry's admission that he had identified many "good places" to build a car  


wash in Anchorage; Trefry's admission that he had been looking at a site down the street  


from the original Fifth Avenue car wash and that Alaska Laser Wash's new owners  


actually built a new car wash on that exact site; Trefry's admission that he was aware of  


other sites for car washes and that he suggested particular sites to Alaska Laser Wash's  


new  owners;  and  the  fact  that  Trefry  assured  Alaska  Laser  Wash's  buyers  that  


"increasing sales and continued profitability are almost unavoidable" if they expanded  


onto the sites he suggested.   Under our holding today, to receive compensation for  


business  damages,  a  business  owner  must  show  that  relocation  was  infeasible.  

                                                                                                                                            19 and  

"Feasible" means "[c]apable of being accomplished or brought about; possible," 

feasibility is a lower threshold than reasonableness.  Applying this legal standard to the  


facts listed above, we conclude no reasonable juror could disagree that it was feasible for  


Trefry to relocate the car wash.  Trefry clearly could have opened a car wash at another  


location because of the undisputed availability of sites upon which to relocate the Fifth  


Avenue car wash, Trefry's conceded ability to obtain financing, and the undisputed fact  


that Alaska Laser Wash's new owners successfully built additional locations on the very  


sites Trefry himself considered and recommended that the new owners consider for  


            18         Cameron v. Chang-Craft                       , 251 P.3d 1008, 1017 (Alaska 2011) (quoting                        

City of Delta Junction v. Mack Trucks, Inc.                                 , 670 P.2d 1128, 1130 (Alaska 1983)).                 

            19         Feasible, AMERICAN  HERITAGE  DICTIONARY  (5th ed. 2014).                                                  


                                                                        -17-                                                                  7129

----------------------- Page 18-----------------------

relocation.  Therefore, it was error for the superior court to deny a directed verdict for  

the State because there was no room for a diversity of opinion among the jurors on the                                                                                                                           

issue of the feasibility of relocation.                         

V.               CONCLUSION  

                                 We REVERSEthesuperior court's denial of the State's motion for directed  


verdict,   VACATE   the   attorney's   fee   and   costs   awards,   and   REMAND   for  


reconsideration of prevailing party status, attorney's fees, and costs.  


                                                                                                       -18-                                                                                                 7129

----------------------- Page 19-----------------------

FABE, Justice, dissenting in part.                                                         

                                          I agree with the court that feasibility rather                                                                                                    than reasonableness is the                                                

correct legal standard to be applied.                                                                                 And I agree that, on the record in this case, the                                                                                               

question of the feasibility of relocating the Fifth Avenue Laser Wash can be decided as                                                                                                                                                                                   

a matter of law in favor of the State.                                                                            But I disagree with the court's implicit conclusion                                                                         

that a directed verdict on the question of feasibility resolves all of the potential damages                                                                                                                                                         

claims in this case. Even if it is feasible for a business to relocate, the business may incur                                                                                                                                                                  

damages for lost profits while it relocates, or, as in this case, while it attempts to sell the                                                                                                                                                                        

business. I would therefore remand the case on the limited issue of lost-profits damages.                                                                                                                                                          

                                          In  State v. Hammer                                                we recognized that a business owner can recover                                                                                           

special damages when the State takes his business property through its power of eminent                                                                                                                                                                

                          1     We discussed lost profits as a type of "business interruption" for which the  


 State could be liable, so long as the business owner could prove his damages with  


                                                                 2   Our discussion of lost profits did not suggest that lost profits were  

reasonable certainty.                                                                                                                                                                                                                                            


part and parcel of a business's value.  To the contrary, we noted that because the State  


could control the amount of damages by, for example, "giving precise and early notice,"  


a business owner could claim lost profits as additional compensation.3  


                                          One  of  the  damages  claims  set  out  by  Trefrey  in  his  complaint  was  


"temporary lost profits."  Those damages were pleaded separately from other types of  


business damages, such as "lost business opportunities and value" and "lost goodwill."  


Because Trefrey adequately alleged lost profits as an item of special damages, he should  


have the opportunity to recover the amount of those damages proved with reasonable  


                     1                    550 P.2d 820, 823-27 (Alaska 1976).                                                              



                                          Id. at 827.  

                     3                    Id.  

                                                                                                                                  -19-                                                                                                                           7129

----------------------- Page 20-----------------------

certainty. The State contends that Trefrey's claim for lost profits is "inapposite" because                                                                                                                                                                                                                             

he did not reopen the business and sold it instead.                                                                                                                                                     But the sale followed the closure of                                                                                                   

the Fifth Avenue location by several months, leaving a time period during which the                                                                                                                                                                                                                                                        

business   presumably   suffered   lost-profits   damages.     Those   damages   are   not   so  

 speculative   that   they   cannot  be   proved   with   reasonable   certainty;   at   a   minimum a   

business   owner   could   present   evidence   of   profits   during   the   same   time   period  

immediately   preceding   the   taking.     In   my  view,   Trefrey   should   be   afforded   the  

opportunity to prove and recover damages for lost profits on remand.                                                                                                                                                                               

                                                     Thedisputedvaluation                                                                     ofTrefrey'sproperty taken                                                                                  througheminentdomain                                              

was the subject of negotiations that spanned many months, and the parties ultimately                                                                                                                                                                                                                          

entered into a settlement of their dispute, with the State paying Trefrey $5.36 million.                                                                                                                                                                                                                                                                    

One of the central contested issues at trial here was the scope of the settlement: The State                                                                                                                                                                                                                                        

contended that it had "increased its valuation" in part based on "the growth potential and                                                                                                                                                                                                                                                

income history" of the Fifth Avenue location, while Trefrey argued that any damage to                                                                                                                                                                                                                                                           

the business was "separate and distinct from the value of the real property" and thus not                                                                                                                                                                                                                                                  

the subject of the settlement.                                                                                       

                                                                                                                                                                                                                                                             4  and when there are no  

                                                      Settlement agreements are interpreted as contracts,                                                                                                                                                                                                                                     

factual  disputes,  "we  review  questions  of  contract  formation  and  interpretation  de  


novo."5  But "[t]he intent of the parties when entering a contract is a question of fact" that  


is "reviewed under the clearly erroneous standard [of review]."6                                                                                                                                                                                                      The jury in this case  


was  asked  to  determine  whether  "the  parties  agree[d]  that  business  damages  were  


                           4                          Chilkoot Lumber Co. v. Rainbow Glacier Seafoods, Inc.                                                                                                                                                                           , 252 P.3d 1011,                           

 1014 (Alaska 2011) (citing                                                                                  Smith v. Cleary                                                 , 24 P.3d 1245, 1247 (Alaska 2001)).                                                                                  

                           5                         Id. (citing Copper River Sch. Dist. v. Traw, 9 P.3d 280, 283 (Alaska 2000)).  


                           6                         K &K Recycling, Inc. v. Alaska Gold Co., 80 P.3d 702, 712 (Alaska 2003).  


                                                                                                                                                                    -20-                                                                                                                                                             7129

----------------------- Page 21-----------------------

included" in the amount the State paid pursuant to the settlement.  And the jury found                                                                                                                                                                                                                                                                                                                                                                                                                            

that they were not.                                                                                                              The jury's finding should be an adequate indication that the purpose                                                                                                                                                                                                                                                                                                                                                          

of the settlement was not so clear as to merit a judgment as a matter of law in favor of the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

 State on this issue. And while the State alleges that Trefrey accepted an additional small                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

 sum as                                             a   relocation   settlement,   the   record   citation   in   its   brief   does  not  support   its  

assertion.   In my view, the purpose of any additional funds Trefrey may have accepted                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

is not established on this record as a matter of law.                                                                                                                                                                                                                                                                          

                                                                                            Because   the   parties'   intent  in   agreeing   to   the   settlement   cannot   be  

determined as a matter of law, I respectfully dissent from the court's ordered remedy of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

a remand solely for reconsideration of prevailing party status, attorney's fees, and costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

I would remand the case to the trial court on the limited question of lost-profits damages                                                                                                                                                                                                                                                                                                                                                                                                                                                               

to Trefrey for the period of time from the taking until the sale of the business.                                                                                                                                                                                                                                                                                                                                                                                                        

                                                                                                                                                                                                                                                                                              -21-                                                                                                                                                                                                                                                                                    7129

Case Law
Statutes, Regs & Rules

IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights