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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. McAnally v. Thompson (6/23/2017) sp-7183
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
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
CHARLEY McANALLY, )
) Supreme Court No. S-15906
Appellant, )
) Superior Court No. 3PA-11-01916 CI
v. )
) O P I N I O N
VIRGIE THOMPSON, JIM )
JOHANSEN, CAROLYN
) No. 7183 - June 23, 2017
GRABOWSKI, and CITY OF )
HOUSTON, )
)
Appellees. )
_______________________________ )
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Palmer, Kari Kristiansen, Judge.
Appearances: Kenneth P. Jacobus, Anchorage, for
Appellant. Danielle M. Ryman and Sarah J. Shine, Perkins
Coie LLP, Anchorage, for Appellees.
Before: Stowers, Chief Justice, Winfree, Maassen, Bolger,
and Carney, Justices.
STOWERS, Chief Justice.
I. INTRODUCTION
The City of Houston fired its police captain shortly before disbanding its
police department. The captain claims that he was terminated in bad faith in order to stop
ongoing investigations into city leaders. He challenges the superior court's refusal to
allow his claim under the Alaska Whistleblower Act, a jury instruction stating that
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termination for personality conflicts does not constitute bad faith, and an award of
attorney's fees and costs. We conclude that the court's refusal to allow his claim under
the Whistleblower Act, its decision to give the personality conflict instruction, and its
award of attorney's fees and costs were not erroneous and therefore affirmin all respects.
II. FACTS AND PROCEEDINGS
A. Facts
The City of Houston hired Charley McAnally to serve as a police officer
in 2009. In October 2010 the City promoted him to the at-will position of police
1 in the absence of a police chief, the police captain served as the head of the
captain;
police force in Houston. McAnally received generally positive employment reviews in
April, October, and December 2010.
McAnally claims that he told Mayor Virgie Thompson soon after she
became mayor that he saw several mistakes in the City's budget and believed that
Treasurer and Personnel Officer Carolyn Grabowski was manipulating numbers.2
McAnally also claims that Thompson agreed with his belief and that she also suspected
Grabowski of manipulating the budget.
According to McAnally, in either December 2010 or January 2011
Thompson and Deputy Mayor Jim Johansen "determined that they were going to get rid
of Captain McAnally." On January 9, 2011, McAnally told Thompson that Grabowski
was under investigation for embezzlement. He claimed that Thompson told Grabowski
1 An at-will employee may be terminated without good cause. See Luedtke
v. Nabors Alaska Drilling, Inc. , 768 P.2d 1123, 1131 (Alaska 1989) ("Employees hired
on an at-will basis can be fired for any reason that does not violate the implied covenant
of good faith and fair dealing.").
2 McAnally supports many of his factual assertions only by citing to the
complaint he filed in this case and not to the record.
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about the investigation so Grabowski could "cover whatever tracks and information
[that] might have been discovered through a complete investigation"; he claimed
Grabowski then contacted McAnally to complain about the investigation.
McAnally asserted he then began investigating the mayor for hindering a
prosecution. He stated that Thompson threatened to investigate the police department
in retaliation for his investigations. McAnally apparently contacted the FBI regarding
the investigations and met with two FBI agents in the parking lot behind the Dairy Queen
in Wasilla.3 He also referred his embezzlement and hindering-prosecution allegations
to the Palmer District Attorney's Office, which asked him to have the FBI or the Alaska
Bureau of Investigation investigate "due to the ongoing political situation in Houston."
On December 31, 2010, around the time of McAnally's investigations, he
was involved in an altercation with a private citizen. Tom Hood, Houston's fire chief;
Christian Hartley, a lieutenant at the Houston Fire Department; and Houston firefighter
Jason Starrett all claimed that McAnally challenged a private citizen to a fight. On
January 10, 2011, the incident appeared in a local newspaper, and McAnally suspected
Hartley of leaking the incident. McAnally was quoted in the article, but he testified that
he only confirmed details of the incident because the paper already knew about it. On
January 11 Thompson suspended McAnally for speaking to the press about the incident,
a violation of City policy. McAnally claimed that Thompson suspended him as
retaliation for his investigation.
In February McAnally had a counseling session with Thompson.
Councilman Lance Wilson was present for that session and later prepared a statement
that appears in the record. According to Wilson's statement Thompson claimed that
3
At trial McAnally did not present any evidence suggesting that an FBI
investigation was ongoing.
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McAnally failed to respond to a call despite being on duty and that, when she finally did
contact him, he responded in an evasive and insubordinate manner. McAnally disagreed
and said that he had informed the mayor that he was in Wasilla on city business and had
not been insubordinate. Thompson disagreed, but McAnally then revealed that he had
recorded their previous conversation. That caused Thompson to retract her disagreement
about McAnally's whereabouts, but she inquired into the nature of his business in
Wasilla. McAnally responded that it was part of a confidential investigation. Wilson,
after listening to McAnally's recording, agreed that McAnally had told Thompson of his
whereabouts and that McAnally did not sound insubordinate. Four days later McAnally
filed a grievance, but the City did not act on it. 4
OnMarch 7 ThompsonwroteupMcAnally forsubmitting apoliceschedule
to the 911 dispatcher two days late. He claims that he filed a grievance challenging that
write-up and that the City did not act on that grievance, but that grievance does not
appear in the record. On March 16 Thompson gave McAnally a mostly negative
performancereview. Shortlyafter thenegativeperformancereview,McAnally informed
the City Council that he and the FBI were investigating Thompson and Grabowski.
On March 20 a local newspaper published an article detailing the FBI
investigation of the City of Houston. The article reported that Deputy Mayor Jim
Johansen contacted the paper to offer his doubt that the FBI was actually investigating;
he stated, "It's not real. It's lies. They're trying to set up the mayor to take a fall."
On March 23 the City Council held a special session to determine whether
it would accept Thompson's March 16 performance review of McAnally; the mayor
recused herself fromthat session. The City Council rejected the performance review and
requested that Johansen prepare a new review with the assistance of Councilmembers
4 The grievance does not appear in the record.
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Wilson and Ruth Blanchard. Johansen's review does not appear in the record, and
McAnally claims that it never got past the drafting stage. While Johansen was
performing this review he was charged with fourth-degree assault by McAnally based
on a citizen complaint. McAnally was a witness in that case.
On April 26 the City Council voted to terminate McAnally's employment.
About two weeks later the City disbanded the police department due to pre-existing
budget constraints.
B. Proceedings
In July 2011 McAnally sued the City of Houston, Thompson, Grabowski,
and Johansen (collectively "the City"), alleging a breach of the implied covenant of good
faith and fair dealing, a constitutional due process violation, and retaliatory discharge.
His claims were premised on his contention that the City wrongfully terminated him in
retaliation for his involvement in criminal investigations regarding Thompson and
Grabowski.
In September 2012 the City moved for summary judgment on all of
McAnally's claims. The City also moved for summary judgment to limit damages and
argued that McAnally's lost wages could not extend beyond the date the City eliminated
the police department and that McAnally could not recover damages he could have
avoided with reasonable efforts by accepting comparable employment following his
termination. The superior court granted the City's motion only with respect to
McAnally's due process claim.
The superior court initially scheduled trial to begin in December 2012.
Trial was continued repeatedly, and it eventually began in November 2014 on
McAnally's claims for breach of the covenant of good faith and fair dealing and
retaliatory discharge. On October 16, 2013, before one of those continuances, McAnally
filed his trial brief, which asserted that he intended to pursue a claim under the Alaska
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Whistleblower Act. He did not file a motion to amend his complaint to add the new
claim. The deadline for McAnally to amend his complaint was November 11, 2011. The
superior court dismissed that claim explaining that every claim must be pleaded, that the
City would be subjected to substantial prejudice if it were forced to defend a claim
introduced that late, and that the facts giving rise to the claim were known to McAnally
at the time he filed his complaint.
At mid-trial, the superior court granted the City's motion for a partial
directed verdict and dismissed Grabowski as a defendant. The trial proceeded to its
conclusion, and the jury returned a unanimous verdict in favor of the remaining City
defendants. The City moved for an attorney's fee award of $106,803.45 pursuant to the
5 the City had offered
City's earlier offer of judgment under Alaska Civil Rule 68;
McAnally $5,000 in March 2013 to satisfy his claims and McAnally did not accept the
offer. Despite McAnally's claim that the offer of judgment was invalid, the superior
court granted the City's Rule 68 attorney's fees motion. The court also awarded the City
$14,564.31 in costs.
McAnally appeals.
III. STANDARD OF REVIEW
We review "the interpretation of a statute de novo, adopting the rule of law
most persuasive in light of precedent, reason, and policy."6 "We review a trial court's
factual findings under a clearly erroneous standard. A factual finding is clearly
5 As we discuss in more detail later in this opinion, Rule 68 sets out the
circumstances under which a party may recover attorney's fees after making an offer of
judgment to an adverse party that was rejected.
6 L.D.G., Inc. v. Brown, 211 P.3d 1110, 1118 (Alaska 2009) (citing Alaskans
for Efficient Gov't, Inc. v. Knowles , 91 P.3d 273, 275 (Alaska 2004)).
-6- 7183
----------------------- Page 7-----------------------
erroneous when we are 'left with a definite and firm conviction on the entire record that
7
a mistake has been made.' "
We review a trial court's denial of leave to amend a complaint for abuse of
8 "We will find an abuse of discretion when the decision on review is
discretion.
manifestly unreasonable."9 We apply our independent judgment to determine whether
a challenged jury instruction correctly states the law.10 " 'We review an award of
attorney's fees for abuse of discretion,' so a fee award 'will not be disturbed on appeal
unless it is "arbitrary, capricious, or manifestly unreasonable." ' "11 "But we consider
de novo '[w]hether the superior court applied the appropriate legal standard in its
consideration of a fee petition,' including 'whether [the] superior court correctly
determined a settlement offer's compliance with Rule 68.' "12
IV. DISCUSSION
McAnally makes three arguments in his appeal: (1) the superior court
abused its discretion when it prohibited him from bringing a claim under the Alaska
Whistleblower Act; (2) the superior court erred by allowing Jury Instruction Number 14
7 Fernandes v. Portwine , 56 P.3d 1, 4 (Alaska 2002) (quoting Jenkins v.
Handel, 10 P.3d 586, 589 (Alaska 2000)).
8 Valdez Fisheries Dev. Ass'n v. Alyeska Pipeline Servs., 45 P.3d 657, 671
(Alaska 2002).
9 Ranes & Shine, LLC v. MacDonald Miller Alaska, Inc., 355 P.3d 503, 508
(Alaska 2015) (citing Tufco, Inc. v. Pac. Envtl. Corp., 113 P.3d 668, 671 (Alaska 2005)).
10 Henrichs v. Chugach Alaska Corp., 250 P.3d 531, 535 (Alaska 2011).
11 Marshall v. Peter, 377 P.3d 952, 956 (Alaska 2016) (quoting Limeres v.
Limeres, 367 P.3d 683, 686 (Alaska 2016)).
12 Id. (alterations in original) (first quoting Limeres, 367 P.3d at 686-87; then
quoting Tagaban v. City of Pelican, 358 P.3d 571, 575 (Alaska 2015)).
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----------------------- Page 8-----------------------
to incorrectly state the law; and (3) the superior court abused its discretion when it
awarded the City 50% of its reasonable attorney's fees under Rule 68.
A. The Superior Court Did Not Abuse Its Discretion When It Dismissed
McAnally's Claim Under The Alaska Whistleblower Act.
On October 16, 2013, McAnally noted in his trial brief that he planned to
13
pursue a claim against the City for a violation of the Alaska Whistleblower Act. This
was the first time McAnally had raised that claim. Trial was set to begin on
November 4, 2013, and the superior court had previously set a November 11, 2011
deadline to amend pleadings. McAnally argued that he would "be able to show that his
discharge was in retaliation for requesting an investigation of the Mayor and City Clerk
by the United States Federal Bureau of Investigation. This is in violation of the Alaska
Whistleblower Act." He continued, "Whether or not these protections are actionable as
a violation of due process of law, they are relevant to good faith and fair dealing."
McAnally did not file a motion to amend his complaint to add this claim.
The superior court dismissed the claim for several reasons. First, the court
agreed with the City that every claim must be pleaded. And the court agreed that the
City would be subjected to substantial prejudice if it were forced to defend a claim that
had been added three weeks before trial without the opportunity to pursue discovery or
file a dispositive motion on the claim. The court further noted that the facts giving rise
to the whistleblower claim were known to McAnally at the time he filed his complaint,
so the claim was not newly discovered.
McAnallyargues that theWhistleblowerActboth provides aseparatecause
of action and also provides evidentiary support for his claim that the City violated the
covenant of good faith and fair dealing. He argues that the court abused its discretion
13
AS 39.90.100-.150.
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in dismissing a standalone claim under the Whistleblower Act and also prohibiting him
from presenting evidence regarding the Whistleblower Act to bolster his claim that the
City breached the covenant of good faith and fair dealing.
First,with respect toMcAnally'sstandaloneclaimundertheWhistleblower
Act, it is not clear whether McAnally intended to seek leave from the superior court to
amend his claim or whether he was simply asserting that he intended to pursue the claim
without pleading it. McAnally was clearly prohibited from pursuing the claim without
pleading it: Alaska law requires that all claims be pleaded so as to give the defendant
"fair notice of the nature of the claim." 14
Assuming that McAnally intended to amend his pleading, Alaska Civil
Rule 15(a) provides that a party may amend a pleading only by leave of court or by
written consent of the adverse party where leave is sought after a responsive pleading
was filed. Rule 15(a) states that "leave shall be freely given when justice so requires."
McAnally argues that the City would not have been prejudiced if he had
been allowed to add the claim because the City was aware of the facts underlying the
claim even before McAnally filed suit. Thus McAnally claims that the superior court
abused its discretion when it dismissed his whistleblower claim. But McAnally points
to no law providing that the standard for amending a complaint is simply that the facts
were known to the other party before litigation began. Being generally aware of the facts
of a possible claim does not mean that the City would not be prejudiced by its inability
to seek discovery or file a dispositive motion before the start of trial. And in dismissing
14 Sykes v. Melba Creek Mining, Inc. , 952 P.2d 1164, 1168 n.4 (Alaska 1998);
see also Alaska R. Civ. P. 10(d) ("A party filing a complaint, counterclaim, or
cross-claim seeking relief under any specific statute is required to cite the statute relied
upon in parentheses following the title of the pleading or in the heading for the section
asserting the statutory claim.").
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McAnally's claim the court pointed to Valdez Fisheries Development Association, Inc.
v. Alyeska Pipeline Service Co. , a case in which Valdez Fisheries moved to add new
15 In Valdez Fisheries the superior court found that the
claims seven weeks before trial.
facts giving rise to the new claims "were 'largely coexistent' with the facts giving rise
to Valdez Fisheries' prior claims[] and that there was 'no adequate reason' why Valdez
Fisheries had not previously asserted the proposed new claims."16 We agreed and
concluded that the superior court did not abuse its discretion in denying leave to amend.17
The same reasoning applies here. McAnally waited over two years to assert his
whistleblower claim, and he did so not by seeking leave to amend but rather by casually
mentioning the claim in his trial brief three weeks before trial. There is nothing to
suggest that justice requires granting McAnally leave to amend his complaint three
weeks before trial when he did not even request leave to amend from the court.
Second, McAnally argues that the superior court erred by not allowing him
to present evidence of the Whistleblower Act violation as part of his breach of good faith
and fair dealing claim. He argues that there is no requirement that evidence be pleaded,
and he adds that the Whistleblower Act "sets a standard for what constitutes good faith
and fair dealing, which is something that the jury is entitled to know." But as the City
correctly observes, "the trial court's order did not bar McAnally from presenting a
whistleblower theory or whistleblower-related evidence in support of his two other
claims." The court simply dismissed McAnally's claim as a standalone claim.18
15 45 P.3d 657, 671 (Alaska 2002).
16 Id .
17 Id .
18 At oral argument counsel for McAnally suggested that the superior court
(continued...)
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The court did not abuse its discretion in denying McAnally's attempt to
assert a Whistleblower Act claim three weeks before trial, and it did not bar McAnally
from presenting whistleblower-related evidence in support of his other claims. We
therefore affirm the court's decision.
B. Jury Instruction Number 14 Was A Correct Statement Of The Law.
McAnally challenges Jury Instruction Number 14 as an incorrect statement
of the law. The instruction stated:
An employer may transfer, demote or terminate an employee
because of a personality conflict with another employee or
supervisor. Transferring, demoting or terminating an
employee because of such conflict does not violate the
covenant of good faith and fair dealing.
McAnally argues that "this instruction allow[ed] Captain McAnally to be terminated in
bad faith simply because there [was] a personality conflict."
The instruction, however, was an accurate statement of relevant law from
19 In that case Seekins sued Era Aviation
our decision in Era Aviation, Inc. v. Seekins.
18 (...continued)
denied a proposed jury instruction that would have used the Whistleblower Act in this
manner and that this was error. The only proposed jury instruction on the Whistleblower
Act that appears in the record did not clarify the way the jury was to use the Act and was
proposed before the court dismissed McAnally's Whistleblower Act claim. Nothing in
the record suggests that McAnally objected to the absence of a jury instruction about the
Whistleblower Act "set[ing] a standard for what constitutes good faith and fair dealing."
McAnally's counsel conceded at oral argument that McAnally was able to present
evidence of retaliatory discharge to the jury. And the court instructed the jury to find for
McAnally if the jury found that there was a retaliatory discharge.
19 973 P.2d 1137, 1141 (Alaska 1999) ("Given the at-will nature of Era's
employment contract with Seekins, we cannot say that the company's alleged desire to
avoid a personality conflict between two of its employees would, if proved, amount to
an impermissible motive for firing Seekins.").
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for breach of the covenant of good faith and fair dealing, alleging that she could only be
terminated for good cause despite an "at-will" termination clause in her employment
20
contract. The superior court denied Era Aviation's motion for summary judgment, but
21
we reversed. We concluded that even if Seekins proved that the real reason she was
terminated was due to a personality clash, "these facts would be legally insufficient to
warrant a finding that Era breached the implied covenant of good faith and fair
22
dealing." Era Aviation makes it clear that an employer does not violate the implied
covenant of good faith and fair dealing by terminating an at-will employee for a
personality conflict with another employee. Case law from other jurisdictions is in
accord.23
McAnally seeks to distinguish Era Aviation. He argues that Era Aviation
was "a single-issue, summary judgment case." He continues, "The only issue involved
was whether or not, in an at-will employment case, firing someone because she could not
get along with a supervisor was or was not a violation of the covenant of good faith and
fair dealing." McAnally argues that his case involves many other issues, such as whether
20 Id . at 1138.
21 Id . at 1138, 1142.
22 Id . at 1141.
23 See Velantzas v. Colgate-Palmolive Co., 536 A.2d 237, 239 n.2 (N.J. 1988)
("An employer is, of course, free to discharge an employee if a genuine 'personality
conflict' exists." (quoting Wheeler v. Snyder Buick, Inc., 794 F.2d 1228, 1233 (7th Cir.
1986))); Sabetay v. Sterling Drug, Inc., 497 N.Y.S.2d 655, 656-57 (N.Y. App. Div.
1986) (noting that termination statement in a personnel manual did not limit an
employer's right to terminate an at-will employee for various reasons including for
personality conflicts); Cty. of Giles v. Wines, 546 S.E.2d 721, 722, 725 (Va. 2001)
(concluding that an at-will employee had no property right in employment and could
therefore be terminated for personality conflicts).
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----------------------- Page 13-----------------------
the employer has acted in violation of public policy. But that is not the question here;
McAnally argues that Jury Instruction Number 14 is an inaccurate statement of the law,
but it is not. Era Aviation clearly stands for the proposition that an employer may
terminate an at-will employee for a personality conflict and not breach the covenant of
good faith and fair dealing. The City proposed the jury instruction based on the fact that
there was a personality conflict between McAnally and the named defendants, and the
court correctly instructed the jury that employment decisions based on personality
conflicts are not breaches of good faith and fair dealing. Instruction Number 14 does not
indicate that an employer may terminate an employee in bad faith or otherwise in
violation of the law. Indeed, the court defined for the jury the covenant of good faith and
fair dealing and instructed the jury to find bad faith if "the discharge was done either for
the purpose of depriving the employee of a benefit reasonably expected from the
employment agreement, or the employer did not act in a way which a reasonable person
would regard as fair." We therefore conclude that Jury Instruction Number 14 was an
accurate statement of the law and the superior court did not err in giving this instruction
to the jury.
C. The Superior Court Did Not Err In Awarding The City Attorney's
Fees and Costs.
McAnally challenges the superior court's attorney's fees award to the City
of $106,803.45 under Alaska Civil Rule 68. Under Rule 68, a party defending a claim
"may serve upon the adverse party an offer to allow judgment to be entered in complete
satisfaction of the claim for the money . . . or to the effect specified in the offer."
According to the rule, where there are multiple defendants and judgment eventually
rendered by the court is at least 10% less than the offer, the offeree shall pay reasonable
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