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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Austin Ahmasuk v. Division of Banking and Securities (1/8/2021) sp-7498
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
AUSTIN AHMASUK, )
) Supreme Court No. S-17414
Appellant, )
) Superior Court No. 3AN-18-06035 CI
v. )
) O P I N I O N
STATE OF ALASKA, DEPARTMENT )
OF COMMERCE, COMMUNITY & ) No. 7498 - January 8, 2021
ECONOMIC DEVELOPMENT, )
DIVISION OF BANKING & )
SECURITIES, )
)
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Andrew Peterson, Judge.
Appearances: Susan Orlansky, Reeves Amodio LLC,
Anchorage, for Appellant. Robert H. Schmidt, Assistant
Attorney General, Anchorage, and Kevin G. Clarkson,
Attorney General, Juneau, for Appellee. Jahna M.
Lindemuth, Holmes Weddle & Barcott, PC, Anchorage, for
Amici Curiae Bristol Bay Native Corporation; Calista
Corporation; Cook Inlet Region, Inc.; and Doyon Limited.
Before: Winfree, Stowers, Maassen, and Carney, Justices.
[Bolger, Chief Justice, not participating.]
WINFREE, Justice.
----------------------- Page 2-----------------------
I. INTRODUCTION
The Alaska Division of Banking and Securities civilly fined Sitnasuak
Native Corporation shareholder Austin Ahmasuk for submitting a newspaper opinion
letter about Sitnasuak's shareholder proxy voting procedures without filing that letter
with the Division as a shareholder proxy solicitation. Ahmasuk filed an agency appeal,
arguing that the Division wrongly interpreted its proxy solicitation regulation to cover
his letter and violated his constitutional due process and free speech rights. An
administrative law judge upheld the Division's sanction in an order that became the final
agency decision, and the superior court upheld that decision in a subsequent appeal.
Ahmasuk raises his same arguments on appeal to us. We conclude that Ahmasuk's
opinion letter is not a proxy solicitation under the Division's controlling regulations, and
we thereforereversethesuperior court's decision upholding the Division's civil sanction
against Ahmasuk without reaching the constitutional arguments.
II. BACKGROUND
A. State Laws And Regulations Relevant To Alaska Native Corporations
Corporations authorized by the Alaska Native Claims Settlement Act
1 2
(ANCSA)
are incorporated under the Alaska Corporations Code. ANCSA explicitly
3
exempts ANCSA corporations from federal securities regulation compliance, and the
1 Pub. L. No. 92-203, §§ 7-8, 85 Stat. 688, 691-94 (1971) (codified as
amended at 43 U.S.C. §§ 1606-1607 (2020)) (authorizing creation of Alaska-chartered
regional and village native corporations).
2 AS 10.06.960-.961 (providing that corporations organized under ANCSA
are subject to corporations code provisions, with specified overriding exceptions).
3 43 U.S.C. § 1625.
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----------------------- Page 3-----------------------
Division thereforeregulatescertain activities ofspecified ANCSAcorporations and their
shareholders and investigates complaints of illegal conduct. 4
The dispute in this appeal - involving ANCSA corporation shareholder
voting and proxy solicitation - requires an initial consideration of relevant Alaska
corporations code statutes,5 Alaska securities regulation statutes,6 and regulations
promulgated by the Division in its role as regulator of ANCSA corporations' shareholder
election activities.7 We begin with shareholder voting, move next to shareholder voting
by proxy, and then conclude with solicitation of shareholder proxies.
1. Shareholder voting
Generally, subject to variation in a corporation's articles of incorporation,
a shareholder has the right to one vote per share owned and to "vote on each matter
4 See, e.g. , AS 45.55.139 (limiting coverage to ANCSA corporations with
500 or more shareholders and total assets exceeding $1,000,000); AS 45.55.910(a)(1)
(authorizing Division to conduct investigations to determine whether "any provision of
this chapter or a regulation or order under this chapter" has been or will be violated);
3 Alaska Administrative Code (AAC) 08.307 (2020) (governing ANCSA corporation
proxy solicitation filings); 3 AAC 08.360 (detailing filing process); see also Henrichs
v. Chugach Alaska Corp. , 260 P.3d 1036, 1044 (Alaska 2011) (stating that ANCSA
corporations are subject to Alaska proxy regulations but not federal proxy regulations).
See generally AS 45.55.138-.990 ("Alaska Native Claims Settlement Act Corporations
Proxy Solicitations and Stock"); 3 AAC 08.305-.365 ("Alaska Native Claims Act
Corporations: Solicitation of Proxies").
5 See generally AS 10.06.005-.995 ("Alaska Corporations Code").
6 See generally AS 45.55.138-.990 ("Alaska Native Claims Settlement Act
Corporations Proxy Solicitations and Stock").
7 See generally 3 AAC 08.305-.365 ("Alaska Native Claims Act
Corporations: Solicitation of Proxies").
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----------------------- Page 4-----------------------
8
submitted to a vote at a meeting of shareholders." And with respect to electing members
to a board of directors, again unless the articles of incorporation provide otherwise, a
9 i.e., may vote "the number of shares owned by the
shareholder may "cumulate votes,"
shareholder for as many persons as there are directors to be elected," giving one
candidate all votes or distributing votes among candidates as the shareholder deems
appropriate.10 For example, a shareholder with 100 shares of stock voting in an election
of 4 members to the board of directors would have 400 votes to cast, either all for 1
candidate or divided among the candidates in any way the shareholder chooses.
2. Shareholder proxy voting
Generally, a "person entitled to vote shares may authorize another person
11
or persons to act by proxy with respect to the shares." The term "proxy" is statutorily
defined in simple fashion as "a written authorization . . . signed by a shareholder . . .
12
giving another person power to vote with respect to the shares of the shareholder."
By statute the Division regulates certain ANCSA corporation and
shareholder election activities.13
The Division has promulgated two relevant regulations
8 AS 10.06.420(a).
9 Rude v. Cook Inlet Region, Inc., 322 P.3d 853, 856-57 (Alaska 2014).
10 AS 10.06.420(d).
11 AS 10.06.418(a); see also AS 10.06.420(c) (permitting shareholder voting
in person or by proxy); AS 10.06.420(d) (permitting proxy voting in director elections).
12 AS 10.06.990(34); see also Proxy, BLACK 'S LAW DICTIONARY (11th ed.
2019) ("Someone who is authorized to act as a substitute for another; esp., in corporate
law, a person who is authorized to vote another's stock shares.").
13 See, e.g., AS 45.55.139 (requiring, for certain ANCSA corporations, that
copies "of all annual reports, proxies, consents or authorizations, proxy statements, and
(continued...)
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about proxies. First, the Division has construed "proxy" more expansively than the
corporations code by defining it as "a written authorization which may take the form of
a consent, revocation of authority, or failure to act or dissent, signed by a shareholder . . .
14
and giving another person power to vote with respect to the shares of the shareholder."
Second, the Division has established specific substantive proxy rules.15 For example, the
relevant regulation provides that one who holds a proxy "shall vote in accordance with
any choices made by the shareholder or in the manner provided by the proxy when the
shareholder has not specified a choice."16 With respect to electing directors, that
regulation also describes how a proxy document must present the shareholder with
13 (...continued)
other materials relating to proxy solicitations distributed, published, or made available
by any person . . . shall be filed with the [Division] concurrently with its distribution to
shareholders"); AS 45.55.160 ("A person may not, in a document filed with the
[Division] or in a proceeding under this chapter, make or cause to be made an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they are made, not
misleading."); AS 45.55.910(a)(1) (authorizing Division to conduct investigations to
determine whether "any provision of this chapter or a regulation or order under this
chapter" has been or will be violated); see generally AS 45.55.138-.990 ("Alaska Native
Claims Settlement Act Corporations Proxy Solicitations and Stock"); 3 AAC 08.305-
.365 ("Alaska Native Claims Act Corporations: Solicitation of Proxies").
14 3 AAC 08.365(12).
15 See 3 AAC 08.335.
16 3 AAC 08.335(b).
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17
voting choices and provides that "if the shareholders have cumulative voting rights, a
proxy may confer discretionary authority to cumulate votes." 18
Discretionary cumulative proxy voting is the underlying issue of this
litigation. As described above, if a corporation allows cumulative voting in director
elections, a shareholder will have the same multiple of votes per share as there are
director candidates; the shareholder may, in the shareholder's sole discretion, allocate
those votes among the director candidates in any manner.19 How does this work with
respect to proxy voting in ANCSA corporations' director elections? A proxy holder
ultimately must vote the shareholder's shares as directed by the shareholder.20 But a
proxy form may provide for a shareholder to grant the proxy holder the same
discretionary cumulative voting authority held by the shareholder.21 The proxy form
must set out options and instructions for the shareholder to direct the proxy holder how
the shares should be voted for individual director candidates.22 And the proxy form must
set out the proxy holder's authority to vote the shareholder's shares in the event the
shareholder fails to designate how the shares are to be voted.23
17 3 AAC 08.335(e).
18 3 AAC 08.335(g).
19 See AS 10.06.420(d).
20 3 AAC 08.335(b).
21 3 AAC 08.335(f)-(g); see also Rude v. Cook Inlet Region, Inc. , 322 P.3d
853, 857 (Alaska 2014) ("This regulation implies that a proxy must explicitly 'confer'
the 'discretionary authority to cumulate votes.' " (quoting 3 AAC 08.335(g))).
22 3 AAC 08.335(e).
23 3 AAC 08.335(d).
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3. Proxy solicitation regulation
Particularly relevant tothisappeal,theDivisionregulatesshareholder proxy
solicitations for some ANCSA corporations: proxy solicitation materials, including
24
proxies and proxy statements, must be filed with the Division and may not contain false
25
material facts (or omit facts necessary to keep a statement from being misleading). The
Division defines "solicitation" as "a request to execute or not to execute, or to revoke a
proxy" and alternatively as the "distributing of a proxy or other communication to
shareholders under circumstances reasonably calculated to result in the procurement,
26
withholding, or revocation of a proxy."
24 The Division's definitions regulation provides that a "proxy statement" is
"a letter . . . or other communication of any type which is made available to shareholders
under circumstances reasonably calculated to result in the procurement, withholding, or
revocation of a proxy." 3 AAC 08.365(14); see also Proxy Statement , B LACK 'S LAW
DICTIONARY (11th ed. 2019) ("An informational document that accompanies a proxy
solicitation . . . .").
25 See AS 45.55.139 (requiring, for certain ANCSA corporations, that copies
"of all annual reports, proxies, consents or authorizations, proxy statements, and other
materials relating to proxy solicitations distributed, published, or made available by any
person . . . shall be filed with the [Division] concurrently with its distribution to
shareholders"); AS 45.55.160 ("A person may not, in a document filed with the
[Division] or in a proceeding under this chapter, make or cause to be made an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they are made, not
misleading."); 3 AAC 08.307 (regarding filing of proxy solicitation materials); 3 AAC
08.315 (prohibiting false or misleading statements in proxy solicitation materials); cf.
3 AAC 08.325 (prohibiting certain proxy solicitations); 3 AAC 08.345 (regarding proxy
solicitations by board of directors); 3 AAC 08.355 (regarding proxy solicitations other
than by board of directors); 3 AAC 08.360 (providing for Division's investigation of
complaints alleging proxy solicitation regulation violations).
26 3 AAC 08.365(16)(A)-(B). The second definition for "solicitation" is the
(continued...)
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----------------------- Page 8-----------------------
B. Sitnasuak Proxy Voting
Sitnasuak, headquartered in Nome, is the largest ANCSA village
corporation in the Bering Straits region and is subject to Division regulation. Sitnasuak
has almost 2,900 shareholders and an 11-member board of directors. Sitnasuak allows
cumulative voting - shareholders thus may cast their cumulated votes for one director
27
candidate or distribute votes among some or all director candidates
- and its
28
shareholders may vote for directors either in person or by proxy. Accordingly,
29
Sitnasuak may, and does, allow discretionary proxy voting.
Discretionary proxy voting in director elections has been the subject of
Sitnasuak shareholder debate for at least the last few years. Sitnasuak's bylaws provide
for a special shareholders' meeting when holders of 10% of its voting stock request it,
and in 2015 a sufficient number of Sitnasuak shareholders petitioned for a special
shareholders' meeting to discuss eliminating discretionary proxy voting. Notice of the
special shareholders' meeting was given in December 2015, and the meeting convened
in early January 2016. A proposal to amend Sitnasuak's articles of incorporation to
eliminate discretionary proxy voting in director elections was explained to the attendees.
But a required voting quorumcould not be established; the remainder of the meeting was
considered informational only, and the parliamentarian made a presentation about
cumulative and proxy voting.
26 (...continued)
same as that for "proxy statement." Compare 3 AAC 08.365(16)(B), with 3 AAC
08.365(14).
27 See supra notes 9-10 and accompanying text.
28 See supra notes 11-12 and accompanying text.
29 See supra notes 17-18 and accompanying text.
-8- 7498
----------------------- Page 9-----------------------
Soon thereafter Sitnasuak issued a newsletter discussing the special
shareholders' meeting and setting out a written version of the parliamentarian's
discussion of cumulative and proxy voting. Sitnasuak's newsletter advocated for
discretionary proxy voting, with the following statements:
Many shareholders believe that the Board of Directors
use discretionary and cumulative voting to keep their power
by reelecting themselves or others. While a discretionary
proxy can have that result, it is also used by shareholders who
believe they are in a minority to elect someone to voice their
interests on the board. . . .
However, electing a minority member to a board can
be difficult. Most shareholders can only attend a meeting by
proxy. This means that they won't know which candidates
running for a board will have enough votes to be elected.
This happens when shareholders . . . vote directed proxies
and others vote discretionary proxies. Directed votes can't be
changed. A candidate who does not get enough directed
votes to win still uses up the directed vote. It can't be
transferred to another candidate.
. . . .
. . . Shareholders who are able to attend a meeting in
person have the opportunity to change their votes and help a
candidate who doesn't have enough proxy votes to
potentially be elected to a board seat. That's also what a
proxy holder can do with a discretionary proxy. If four
candidates run together on one proxy, and only one has
enough directed votes to give them a chance of winning a
board seat, then a discretionary proxy can mean the
differencebetween electing aminority candidateto theboard,
or not. Eliminating discretionary voting removes the
possibility for this to happen.
Of course this means that the majority can also use
discretion to assure election of a maximum number of
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----------------------- Page 10-----------------------
majority directors. Shareholders who support minority
candidates don't like this outcome, but it's just fair.
. . . .
While discretionary voting is controversial, if it is
applied fairly, it has benefits for all shareholders.
C. Ahmasuk's Letter And The Complaint
In early February 2017 - well before Sitnasuak's annual shareholders'
meeting and at least two months before any director candidates were announced or any
election-related materials were distributed to shareholders - Ahmasuk submitted the
following opinion letter published in the Nome Nugget:
Dear Editor,
The Village Corporation for Nome i.e. Sitnasuak
Native Corporation (SNC) will soon be holding its annual
election and shareholders will file for candidacy. SNC's
shareholders have voiced time and time again that they do
NOT want discretionary proxies used. Discretionary proxies
are NOT required by any Alaskan law and there is NO law
that prohibits an ANCSA corporation from prohibiting them
for elections. Hundreds of SNC shareholders have said
through public letters, social media, or through mailings that
they do NOT want discretionary proxies used for elections.
I believe SNC shareholders are realizing that discretionary
proxies are harmful to our election process and are realizing
in greater numbers such practices are disrespectful to our
traditions. In 2015 and 2016 I and others spent many hours
collecting signatures for a request for a special meeting to do
away with discretionary proxies. We collected hundreds of
signatures and we met a 10% requirement as required by
Alaskan law to petition the SNC Board of Directors to
consider doing away with discretionary proxies and to
request a special meeting. You might ask yourself why all
this commotion about discretionary proxies? Because I and
others have thoroughly researched the issue and recognized
there is a dramatic ethical argument about what is right and
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what is wrong with SNC's elections. Discretionary proxies
have allowed single persons to use discretionary proxies to
dramatically alter the outcome of an election for their singular
goal. You know who they are they are members of the
SNC 6. Please do NOT vote a discretionary proxy in 2017.
Thank you[.] (Emphases in original.)
A Sitnasuak director complained to the Division that Ahmasuk's letter was
a proxy solicitation seen by more than 30 people.30 The director alleged that Ahmasuk
therefore had violated proxy solicitation regulations by (1) not concurrently filing
required disclosures with the Division31 and (2) making false and misleading statements
about discretionary proxy use.32
30 See 3 AAC 08.360(a) ("A shareholder, director, or officer of a corporation
subject to AS 45.55.139, aggrieved by an alleged violation of 3 AAC 08.305 - 3 AAC
08.365 may request that the [Division] investigate the alleged violation.").
31 See AS 45.55.139 ("A copy of all . . . materials relating to proxy
solicitations distributed, published, or made available by any person to at least 30 Alaska
resident shareholders of a corporation organized under . . . [ANCSA] that has total assets
exceeding $1,000,000 and a class of equity security held of record by 500 or more
persons shall be filed with the [Division] concurrently with its distribution to
shareholders."). Required disclosures include: the name and address of each participant
joining in the solicitation; identification and description of the participant's financial
interests and activities within the corporation; identification of legal proceedings the
participant is involved in adverse to the corporation; and methods used to solicit proxies,
estimated solicitation expenses, and who would bear the expenses. 3 AAC 08.355.
32 See AS 45.55.160 ("A person may not, in a document filed with the
[Division] or in a proceeding under this chapter, make or cause to be made an untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they are made, not
misleading."); 3 AAC 08.315(a) ("A solicitation may not be made . . . that contains a
material misrepresentation.").
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D. Administrative Proceedings And Division Decision
The Division notified Ahmasuk of the complaint, later asking him whether
he had filed his letter with the Division and whether he could support his substantive
assertions about proxy voting. Ahmasuk responded that the proxy regulations did not
apply because his letter was published prior to candidate and proxy announcements for
the upcoming election. Ahmasuk also contended that the regulations are nebulous and
that the investigation violated his First Amendment free speech right. Ahmasuk said
that, based on his personal experience and assessment of past elections, he believed his
statements, including his contention that discretionary proxies allowed individuals to
alter election outcomes, were factual.
In mid-March -stillbeforeany director candidates wereannounced or any
annual meeting election-related materials were distributed to shareholders - the
Division issued an order concluding that Ahmasuk's letter was a proxy solicitation
requiring AS 45.55.139 disclosures. The Division's order stated that Ahmasuk thus had
violated 3 AAC 08.307 by failing to file a copy of the letter with the Commissioner and
3 AAC 08.355 by failing to file required disclosures. The Division also concluded that
Ahmasuk had violated 3 AAC 08.315(a) by making the material misrepresentation that
discretionary proxies have allowed individuals to alter election outcomes. The Division
ordered Ahmasuk to pay a $1,500 civil penalty and to comply with Alaska securities
laws and regulations.
Ahmasuk appealed the order, requesting a hearing and that the order be set
33 He listed three grounds for setting aside the decision, arguing that his letter was:
aside.
33 See AS 45.55.920(d) (providing that before imposing penalty "the
[Division] shall give reasonable notice of and an opportunity for a hearing");
AS 44.64.030(a)(39) (providing that Office of Administrative Hearings conduct hearing
(continued...)
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----------------------- Page 13-----------------------
(1) protected by the First Amendment as political speech; (2) not a proxy solicitation;
and (3) not false or misleading. The parties agreed to address as a threshold matter
whether Ahmasuk's letter was a proxy solicitation subject to regulation and to allow
appellate proceedings to conclude on that issue before later, if necessary, addressing
whether Ahmasuk's letter contained a material misrepresentation.
Ahmasuk sought summary adjudication on the proxy solicitation question.
The thrust of Ahmasuk's argument was that his letter could not qualify as a proxy
solicitation because it "was not 'reasonably calculated to result in the procurement,
withholding, or revocation of a proxy.' " Ahmasuk contended that a reasonable reading
of the proxy solicitation regulation "does not alert a shareholder that [it applies] to public
statements about the election process in general . . . when no candidates have been
announced, no individuals . . . are asking shareholders to sign proxies . . . , and no
shareholder vote on a particular matter is scheduled." Ahmasuk also contended that if
the proxy solicitation regulation covered his letter, the regulation would violate his
constitutional due process and free speech rights.
Following briefingand oral argument,theAdministrativeLawJudge(ALJ)
upheld the Division's order. The ALJ's decision noted the following undisputed facts:
Ahmasuk's letter was written two months before the identification of candidates and five
months before the election; his letter did not explicitly advocate for or against any
distinct outcome of the election; and his letter urged shareholders not to vote by
discretionary proxy. The ALJ focused on one sentence from the letter - "Please do
NOT vote a discretionary proxy in 2017" (emphasis in original) - noting the Division's
33 (...continued)
required under AS 45.55 relating to ANCSA corporation proxy solicitations).
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----------------------- Page 14-----------------------
agreement at oral argument "that the letter would not constitute a proxy solicitation if it
did not include [that] sentence."
The ALJ ultimately concluded that the sentence in Ahmasuk's letter fit
within the regulatory definition of a proxy solicitation because it was "both a direct
request to not execute a discretionary proxy, as well as a communication reasonably
calculated to result in the withholding of a discretionary proxy." The ALJ rejected
Ahmasuk's free speech challenge, noting that "Ahmasuk did not stop at simply
communicating his position -he requested that . . . shareholders not vote a discretionary
proxy." The ALJ also rejected Ahmasuk's due process challenge, quoting the regulation
and stating that "[i]t seems reasonable that a reader of this regulation would understand
that an actual request to withhold a type of vote, as in . . . Ahmasuk's letter, falls within
34
the definition." The ALJ's decision ultimately became the Division's final decision.
E. Superior Court Proceedings
Ahmasuk appealed to the superior court, reiterating his legal arguments.
The superior court first rejected Ahmasuk's argument that the proxy solicitation
regulation cannotapply absent identifiablecandidates, proxy forms,and an election. The
court concluded that the "regulatory scheme provides for broad application" and that
Ahmasuk's interpretationwoulddefycommon senseand theregulation's plain language.
The superior court next rejected Ahmasuk's argument that the regulation,
as applied, violated his constitutional right to due process. The court reasoned that the
regulatory language defining solicitation as "distributing . . . communication to
shareholders under circumstances reasonably calculated to result in the . . . withholding
. . . of a proxy" offered fair notice that communicating with shareholders and urging
34 See AS44.64.060(e)-(f)(providing that Divisionretainsdiscretiontoadopt,
revise, or reject ALJ decision within certain time limits, otherwise "the [ALJ's] proposed
decision is the final agency decision").
-14- 7498
----------------------- Page 15-----------------------
them to withhold proxies could be deemed a proxy solicitation. The court contrasted
Ahmasuk's concern "that under a broad and inclusive reading of . . . solicitation every
disparaging comment by a shareholder will be treated as a proxy statement because it
might influence a shareholder vote," with his letter "specifically referencing the
upcoming election, specifically urging sharehold[ers] to withhold a proxy." The court
concluded that the regulations were clear, instructive, and provided fair notice that a
statement like Ahmasuk's letter could be considered a proxy solicitation and that failure
to register merited a fine.
The superior court also rejected Ahmasuk's argument that the Division's
application of the proxy solicitation regulations violated his freedom of speech. Noting
the government's compelling interest in regulating election integrity and citing case law
suggesting proxy solicitation regulations do not violate the constitution's free speech
35 the court concluded that even statements not advocating for or against a
guarantee,
particular candidate may be regulated as proxy solicitations.
F. Appeal
Ahmasuk appeals the superior court's decision. The Division's position is
supported by amici curiae Bristol Bay Native Corporation, Calista Corporation, Cook
Inlet Region, Inc., and Doyon Limited. Sitnasuak did not participate in the Division
proceedings, the superior court appeal, or this appeal.
III. STANDARD OF REVIEW
"When the superior court has acted as an intermediate court of appeal, we
review the merits of the administrative agency's decision without deference to the
35 Meidinger v. Koniag, Inc., 31 P.3d 77, 84-85 (Alaska 2001).
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----------------------- Page 16-----------------------
36
superior court's decision." The parties dispute which standard of review should govern
our consideration of the Division's regulatory interpretation and conclusion that
Ahmasuk's letter was a proxy solicitation. The Division and Amici argue that we should
employ a deferential standard of reviewforthis threshold question. Ahmasuk argues that
we should not defer to the Division's interpretation of the regulations.
We generally employ the following standards of review when considering
an agency action based on its interpretation of its statutory directives and regulations:
We apply the reasonable basis standard to questions of
law involving "agency expertise or the determination of
fundamental policies within the scope of the agency's
statutory functions." When applying the reasonable basis
test, we "seek to determine whether the agency's decision is
supported by the facts and has a reasonable basis in law, even
if we may not agree with the agency's ultimate
determination." We apply the substitution of judgment
standard to questions of law where no agency expertise is
involved. Under the substitution of judgment standard, we
may "substitute [our] own judgment for that of the agency
even if the agency's decision had a reasonable basis in law."
. . . We review an agency's interpretation and
application of its own regulations using the reasonable basis
standard of review. "We will defer to the agency unless its
'interpretation is plainly erroneous and inconsistent with the
regulation.' " "We give more deference to agency
interpretations that are 'longstanding and continuous.' " [37]
36 Studley v. Alaska Pub. Offices Comm'n , 389 P.3d 18, 22 (Alaska 2017)
(quoting Tolbert v. Alascom, Inc. , 973 P.2d 603, 606-07 (Alaska 1999)).
37 Davis Wright Tremaine LLP v. State, Dep't of Admin., 324 P.3d 293, 299
(Alaska2014) (alterationin original) (footnotesomitted) (first quoting Marathon Oil Co.
v. State, Dep't of Nat. Res., 254 P.3d 1078, 1082 (Alaska 2011); then quoting Tesoro
Alaska Petroleum Co. v. Kenai Pipe Line Co. , 746 P.2d 896, 903 (Alaska 1987); then
(continued...)
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----------------------- Page 17-----------------------
Because our conclusion would be the same regardless of the standard of
review, we express no opinion on the parties' disagreement. We explain our decision
using the more deferential standard.
IV. DISCUSSION
Thefundamentalquestion beforeus iswhether theDivision'sinterpretation
and application of its definition of "solicitation," as it relates to the definition of "proxy,"
is reasonable under the facts and circumstances of this case. Both the statute and the
Division's regulations define "proxy" as "a written authorization . . . signed by a
shareholder . . . giving another person power to vote" the shareholder's shares.38 The
regulations also provide that the written document "may take the form of a consent,
revocation of authority, or failure to act or dissent."39
For our purposes, then, a proxy is a written authorization or consent, or a
written revocation of an authorization or consent, for someone to vote a shareholder's
shares. This is reinforced by 3 AAC 08.365(16)'s two-pronged definition of proxy
"solicitation": under (A), "a request to execute or not to execute, or to revoke a proxy";
and under (B), a "communication to shareholders . . . reasonably calculated to result in
the procurement, withholding, or revocation of a proxy" (emphasis added). We are
concerned only with a putative solicitation of a proxy execution or revocation for
Sitnasuak's 2017 director election.40
37 (...continued)
quoting id.; then quoting Kuzmin v. State, Commercial Fisheries Entry Comm'n, 223
P.3d 86, 89 (Alaska 2009); and then quoting Marathon Oil, 254 P.3d at 1082).
38 AS 10.06.990(34); 3 AAC 08.365(12).
39 3 AAC 08.365(12).
40 See 3 AAC 08.325(4)-(5) (prohibiting proxy solicitation conferring
(continued...)
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With this in mind, to see how a Sitnasuak shareholder would execute and
make a designation for directed or discretionary voting on a proxy card solicited by
Sitnasuak's board of directors months after Ahmasuk's opinion letter, Sitnasuak's
official proxy card for the June 2017 annual shareholder meeting's election of four
directors is reproduced, in relevant part, below.
40 (...continued)
authority to vote "at more than one shareholders' meeting or . . . at any shareholders'
meeting other than the one disclosed").
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OFFICIAL PROXY CARD S I T N A S U A K
NATIVE CORPORATION
Solicitation by the Board of Directors for Shareholder Name: Voting Shares:
the 2017 Annual Meeting of Shareholders Address: Vote:
For greater detail on how to vote, see your 2017 Proxy Statement
Check the box of your choice. Check only one box.
� Directed - If you wish to direct specific numbers of votes to certain nominees, either within the Board of Directors'
slate or among the independent nominees, write the number of votes you wish to give to each nominee next to that
nominee's name. Vote for no more than a total of four nominees.
� Discretionary - Your votes will be voted for candidates on the Board of Directors' slate. Do not indicate your votes
below. The Corporation will distribute your votes among its slate at the discretion of the Proxyholders named below.
� Quorum Only - If you wish to withhold authority to vote, your proxy will be counted for quorum purposes only. If
you check this box, no nominee will receive any of your votes, unless you have also checked the discretionary voting
box or cast directed votes for a nominee.
Vote for Directors: How Many Votes Do You Have? See the top right of your proxy card for the number of voting shares you
own and the number of votes you have for directors. For example, 100 shares = 400 votes. Four board seats are up for election
this year. The four nominees with the highest number of votes will be elected.
BOARD OF DIRECTORS ' NOMINEES INDEPENDENT NOMINEES
The Board of Directors endorses the following slate of The following nominees are independent candidates. They
nominees. If you checked the "Discretionary" or "Quorum are not endorsed by the Board of Directors. If you checked
Only" box, you should not write in the number of votes. the "Discretionary" or "Quorum Only" box, you should not
write in the number of votes.
Nominee # of Directed Votes
Nominee # of Directed Votes
[Names Redacted] _________
[Names Redacted] _________
I hereby appoint as my attorneys in fact and proxies . . . . to vote all of my shares of Sitnasuak Native Corporation that I could vote,
including discretionary authority to selectively cumulate votes, with all the powers that I would possess if personally present at the meeting.
If this proxy is signed and no specific direction is given, this proxy will be counted for quorum purposes only. If I have directed votes to
specific candidates but checked "Discretionary" or "Quorum Only" at the top of this Proxy Card, my directed votes shall prevail. CAST MY
VOTES IN THE MANNER INDICATED ABOVE.
[Signature Execution Block and Instructions Redacted]
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We also note that in May 2017, after the initiation of the enforcement action
underlying this appeal, three Sitnasuak shareholders, including the Sitnasuak director
who filed the complaint against Ahmasuk, solicited proxies to vote for themselves as
directors at the 2017 annual meeting. This group's proxy card was designated a
"Discretionary Proxy Card" and conferred authority to use discretionary cumulative
voting to elect as many of the three shareholders "as [a] proxy holder decides is
appropriate." But the card instructed that a shareholder could withhold authority to vote
for one or more of the three candidates by striking out the candidate's name, and, of
41 This proxy
course, a shareholder also could have specified how to allocate the votes.
card is set out in relevant part below.
41 See 3 AAC 08.335(b), (e), (g); supra notes 20-22 and accompanying text.
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Independent Shareholder Solicited Discretionary Proxy Card
For the Sitnasuak Native Corporation Annual Meeting of Shareholders
I appoint [Names Redacted] with full power of substitution, to represent me as my proxy and to
vote my shares in accordance with the instructions in this document at the [June 2017] Annual
Meeting of Shareholders of Sitnasuak Native Corporation . . . and at any adjournment thereof.
INSTRUCTIONS TO PROXY HOLDER
For the election of directors, my proxy holder is instructed to cumulate and distribute my votes
among the following people, to elect as many to the Sitnasuak Native Corporation Board of
Directors as my proxy holder decides is appropriate.
[Names Redacted]
(You may withhold authority to vote for a nominee by lining
through or otherwise striking out the name of that nominee).
For other matters, my proxy holder is given discretionary authority to vote my shares on matters
incident to the conduct of the meeting and on any other matter, not specifically addressed by this
proxy, which may properly come before the meeting.
I have received the Sitnasuak Native Corporation 2016 Annual Report and the Notice of Annual
Meeting & Proxy Statement dated April 7, 2017, and a Supplemental Proxy Statement from the
proxy holder named above.
[Signature Execution Block Redacted]
[Proxy Submission Instructions Redacted]
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As weanalyzetheDivision'sapplication ofitsproxysolicitation regulation
to Ahmasuk's opinion letter, context is key. The important contextual backdrop in this
case is the longstanding corporate governance debate about Sitnasuak's allowing
discretionary cumulative proxy voting for corporate director elections. How are
shareholders supposed to debate the issue without what the Division contends is a
"communication to shareholders . . . reasonably calculated to result in . . . withholding"
42 For example, how could a group of Sitnasuak shareholders even
some future proxy?
have prepared and submitted a petition for a corporate charter change eliminating
discretionary cumulativevotingfor directorswithoutcoming withintheDivision's broad
interpretation of its solicitation definition? To avoid penalties, must such petition
communications and related statements asking shareholders to use direct and not
discretionary proxy forms be filed with the Division as a proxy solicitation, along with
other burdensome requirements? Surely not.
For example, compare Ahmasuk's letter with Sitnasuak's newsletter. Both
reference the shareholder debate about discretionary proxy voting. And both reference
dissatisfied shareholders' efforts to call a special shareholders' meeting for a vote on
eliminating discretionary proxy voting. With respect to the effect of discretionary proxy
voting, Sitnasuak said:
Directed votes can't be changed. . . .
. . . .
. . . Shareholders who are able to attend a meeting in
person have the opportunity to change their votes and help a
candidate who doesn't have enough proxy votes to
potentially be elected to a board seat. That's also what a
proxy holder can do with a discretionary proxy . (Emphasis
added.)
42
3 AAC 08.365(16)(B).
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Consistent with Sitnasuak's statement, but using different terms about discretionary
proxy holders being able to change votes to get a desired result, Ahmasuk said:
"Discretionary proxies have allowed single persons to use discretionary proxies to
dramatically alter the outcome of an election for their singular goal."
UndertheDivision'sregulatory interpretation, Sitnasuak'snewslettercould
be seen as reasonably calculated to result in the eventual procurement of a future
discretionary proxy card, or at least the eventual box-check for discretionary proxy
voting on the corporate proxy card. The record reflects that Sitnasuak did not file its
newsletter with the Division when it was circulated to shareholders and that Sitnasuak
faced no enforcement action by the Division. Indeed, the ALJ noted that "[t]he
Division's interpretation at oral argument appear[ed] at odds with other Division
decisions on the same issue," lending credence to Ahmasuk's argument that the
regulation was "subject to inconsistent enforcement."
The federal Securities and Exchange Commission (SEC), when defining
solicitation,consideredtheimpact ofexcessiveproxy solicitation regulation oncorporate
43 Because the Division apparently adopted the SEC's then-existing
governance debate.
solicitationdefinitionwhenpromulgating theDivision's definitions regulation,44 theSEC
definition's history provides insight. In 1935 the SECfirst defined solicitation to include
43 See Regulation of Communications Among Shareholders, 57 Fed.
Reg. 48,276 (Oct. 22, 1992) (hereinafter 1992 Amendments).
44 Compare 17 C.F.R. § 240.14a-1(l)(1)(iii) (defining solicitation, in part, as
"furnishing of a form of proxy or other communication to security holders under
circumstances reasonably calculated to result in the procurement, withholding or
revocation of a proxy"), with 3 AAC 08.365(16)(B) (defining solicitation, in part, as "the
distributing of a proxy or other communication to shareholders under circumstances
reasonably calculated to result in the procurement, withholding, or revocation of a
proxy").
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any "request for a proxy, consent, or authorization, or the furnishing of any form of
45
proxy."
In 1938 the SEC amended the definition to include any proxy request,
46 In 1942
regardless whether "accompanied by or included in a written form of proxy."
the SEC revised the definition to include any request "reasonably calculated to" cause
a shareholder to execute, not to execute, or to revoke, a proxy.47
Most pertinent to this case, in 1956 the SEC definition expanded to include
"furnishing of a form of proxy or other communication to security holders under
circumstances reasonably calculated to result in the procurement, withholding, or
revocation of a proxy."48 In adopting what essentially is a parallel provision to 3 AAC
08.365(16),49 the SEC primarily was targeting communications by those who intended
to solicit or already had solicited proxies before formally beginning solicitation.50 The
45 Exchange Act Release No. 34,378, 1935 WL 29270 (Sept. 24, 1935).
46 Exchange Act Release No. 34,1823, 1938 WL 33169 (Aug. 11, 1938).
47 See Exchange Act Release No. 34,3347, 1942 WL 34864 (Dec. 18, 1942).
48 See Adoption of Amendments to Proxy Rules, Exchange Act Release
No. 34,5276, 1956 WL 7757 (Jan. 17, 1956) (hereinafter 1956 Amendments).
49 See supra note 44.
50 See 1956 Amendments, supra note 48, at 34,5277 ("[S]tatements made for
the purpose of inducing security holders to give, revoke, or withhold a proxy with
respect to a matter to be acted upon by security holders of an issuer . . . by any person
who has solicited or intends to solicit proxies . . . may involve a solicitation within the
meaning of the regulation, depending upon the particular facts and circumstances."); see
also 1992 Amendments, supra note 43, at 48,278 n.22 (explaining that SEC's 1956
definition amendment clearly "was principally concerned with communications 'by any
person who has solicited or intends to solicit proxies' prior to the formal commencement
of the solicitation").
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SEC apparently was seeking "to address abuses by persons who were actually engaging
in solicitations of proxy authority in connection with election contests." 51
But the SEC later acknowledged its "proxy rules ha[d] created unnecessary
regulatory impediments to communication among shareholders and others and to the
effective use of shareholder voting rights."52 The SEC was concerned that the
solicitation definition, too broadly construed, could "turn almost every expression of
opinion . . . into a regulated proxy solicitation."53 It recognized that excessive regulation
had "a chilling effect on discussion of management performance"54 and raised First
Amendment free speech concerns, particularly in regulating persons who are not in fact
soliciting proxy authority.55 The SEC clarified that when it adopted the 1956 definition
it did not intend to regulate "persons who did not 'request' a shareholder to grant or to
revoke or deny a proxy, but whose expressed opinions might be found to have been
reasonably calculated to affect the views of other shareholders positively or negatively
56 Thus in 1992, to better
toward a particular company and its management or directors."
51 1992 Amendments, supra note 43, at 48,277.
52 Id.
53 Id. at 48,278.
54 Id. at 48,279.
55 See id. ("A regulatory scheme that inserted [SEC] staff and corporate
management into every exchange and conversation among shareholders, their advisors
and other parties on matters subject to a vote certainly would raise serious questions
under the free speech clause of the First Amendment, particularly where no proxy
authority is being solicited by such persons.").
56 Id. at 48,278.
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----------------------- Page 26-----------------------
achieve the proxy regulations' purposes, the SEC adopted amendments significantly
narrowing the "excessive regulatory reach of 'solicitation.' " 57*
Wesharesimilar concerns aboutthis case, namely that the Division's broad
regulatory interpretation contravenes the proxy regulations' purposes and stifles
corporate governance debate. If the solicitation regulation can cast such a wide net that
it applies without regard to whether there actually is a pending election with known
director candidates and proxy cards circulating (or known to be circulating imminently)
57 1992 Amendments, supra note 43. After the U.S. Supreme Court
recognized commercial speech as protected under the First Amendment in Virginia State
Board of Pharmacy v. Virginia Citizens Consumer Council, Inc. , 425 U.S. 748, 762
(1976), some predicted a "collision" between the First Amendment and securities
regulation. See, e.g. , Frederick Schauer, The Boundaries of the First Amendment: A
Preliminary Exploration of Constitutional Salience , 117 H ARV. L. R EV. 1765, 1780
(2004) ("Starting in the early 1980s, claims that the entire scheme of securities regulation
needed to be tested against First Amendment standards became more common."); Karl
M. F. Lockhart, Note, A 'Corporate Democracy'?: Freedom of Speech and the SEC ,
104 V A. L. R EV. 1593, 1625 (2018).
Amid debate in the 1980s and early 1990s about the First Amendment's
application to securities regulation, some scholars focused on the free speech concerns
stemming from proxy solicitation regulation. See, e.g., Aleta G. Estreicher, Securities
Regulation and the First Amendment , 24 G A. L. R EV. 223, 314 (1990) (explaining that
SEC's "expansive definition" of solicitation overregulates expressive communications
that "make no mention of proxies, proxy contests or upcoming shareholder meetings");
Clark A. Remington, Note, A Political Speech Exception to the Regulation of Proxy
Solicitations, 86 C OLUM. L. R EV. 1453, 1468-71, 1474 (1986) (arguing that when a
"proxy solicitation addresses a matter of public or political concern" it requires greater
constitutional protection). As previously discussed, the SEC adopted the 1992
amendments in part to address such First Amendment concerns. See Lockhart, supra,
at 1626. And any expected surge in First Amendment challenges to proxy solicitation
regulation never occurred. Id . at 1625-27.
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----------------------- Page 27-----------------------
for shareholder signatures, then the regulation may well go beyond valid regulation and
into free speech infringement. 58
And it would be difficult to enforce even-handedly. For example, the
Division conceded it has no regulatory interest in whether an ANCSA corporation
shareholder votes in person or by proxy in director elections, and presumably the
Division has no regulatory interest in whether an ANCSA corporation allows or
disallows discretionary cumulative voting in director elections. But the Division
responded to our questioning at oral argument by saying that it would be a "technical"
violation - apparently meaning unlikely to be enforced - if a shareholder
communicated a general desire that all shareholders attend an annual meeting in person
rather than give someone a proxy. There are few shades of gray between that
hypothetical and Ahmasuk's communicated general desire that, if a shareholder grants
a proxy, it should be a directed rather than discretionary proxy.59
58 The Division argues that in Meidinger v. Koniag, Inc. , 31 P.3d 77, 84-85
(Alaska 2001), we concluded that the Division's proxy solicitation regulations were not
vague or overbroad and therefore did not violate free speech protection under article I,
section 5 of the Alaska Constitution. But what we said in that case was that the
challenger - who was actively soliciting proxy votes to oppose an upcoming ballot
proposition - had failed to support his free speech argument with any case law, and we
therefore rejected his argument. Id. at 85. It is beyond dispute that reasonable state
regulation of commercial speech is not completely barred by constitutional free speech
protection. See id. at 85 n.18. That begs the question of the reach, or overreach, of a
specific regulatory application.
59 If the line between lawful proxy solicitation regulation and unlawful
infringement of free speech regarding corporate governance is left unclear, then the
regulation also fails to give fair notice of what conduct is required and prohibited. "Laws
should give the ordinary citizen fair notice of what is and what is not prohibited. People
should not be required to guess whether a certain course of conduct is one which is apt
to subject them to criminal or serious civil penalties." Alaska Pub. Offices Comm'n v.
(continued...)
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Consider again the undisputed facts of this case. Ahmasuk wrote his letter
in February; Sitnasuak's annual shareholder meeting was not held until the summer.
Althoughin Februaryshareholders knewthat an annualshareholder meetinganddirector
election would take place sometime in the future, no director candidates had been
announced, no required corporate or other election-related disclosures had been
circulated, and no proxy cards had been circulated. Because no proxy card was available
- or known to be soon available - for shareholders' execution, nothing concrete
60
existed for Ahmasuk to ask a shareholder to execute, not execute, give, or withhold.
And Ahmasuk was neither running as a director candidate nor asking to be a
proxyholder.
To the extent the Division viewed Ahmasuk's opinion letter as directed at
a specific proxy card, it could have been only the expected annual Sitnasuak official
proxy card.61 As discussed, the allegedly offending sentence in Ahmasuk's letter was
a request that shareholders "NOT vote a discretionary proxy." (Emphasis in original.)
But Sitnasuak's proxy card is no more a "discretionary proxy card" than it is a "directed
59 (...continued)
Stevens, 205 P.3d 321, 325-26 (Alaska 2009) (quoting VECO Int'l, Inc. v. Alaska Pub.
Offices Comm'n, 753 P.2d 703, 714 (Alaska 1988)).
60 See Estreicher, supra note 57, at 318 ("[W]hen no meeting has been
scheduled, the issues are only beginning to take shape, and the speaker is seeking to
influenceviews on corporateaffairs rather thaninduceimpending shareholder action, the
state is shorn of the corporate suffrage justification for regulating intracorporate
communications.").
61 Nothing in the record suggests that in February Ahmasuk knew or should
have known that a competing proxy card would circulate in May. And the Division's
enforcement order against Ahmasuk was issued in March, well before the May proxy
card circulated. The Division's enforcement could not have been predicated on May's
then-unknown proxy card.
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----------------------- Page 29-----------------------
proxy card"; it allows a shareholder to check a box for either form of voting. The proxy
card must be filled out with a shareholder's instructions and then executed; Ahmasuk did
not ask that the upcoming Sitnasuak proxy card be executed, not executed, given, or
withheld; he effectively asked only that shareholders not check the discretionary proxy
62 In the context of this case, and at its broadest, the solicitation regulation
voting box.
governs only seeking the execution or non-execution of a proxy.63 If the Division
predicated its enforcement action on Ahmasuk's statement being directed to the then-
unissued Sitnasuak official proxy card, the Division's solicitation definition does not
seem to cover his statement.
And the Division's interpretation appears to conflict with its regulations
describing the effect of "withholding a proxy." Although the term is not expressly
defined, a regulation describing proxy requirements clearly explains what must be
provided on a proxy form for director elections:
(A) a box opposite the name of each nominee which
may be marked to indicate that authority to vote for that
nominee is withheld;
62 The ALJ noted that "the parties did not offer persuasive authority on
whether [advocating against] a type of proxy . . . qualifies as a solicitation." (Emphasis
in original.) Rather than question whether the Division's interpretation was in fact
reasonable, the ALJ simply assumed that the Division's broad "definition of solicitation
[was] therefore reasonable" based on a lack of contradictory authority. The ALJ thus
concluded that Ahmasuk's letter was "both a direct request to not execute a discretionary
proxy" under 3 AAC 08.365(A) and "a communication reasonably calculated to result
in the withholding of a discretionary proxy" under 3 AAC 08.365(B). The ALJ's
ultimate conclusion, however, relied only on subsection (B)'s "reasonably calculated"
definition, and the superior court affirmed only on subsection (B).
63 3 AAC 08.365(16).
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(B) an instruction that the shareholder may withhold
authority to vote for a nominee by lining through or
otherwise striking out the name of that nominee ; . . . . [64]
The term "proxy" refers to "a written authorization . . . to vote";65 regulatory language
describing "withhold[ing] authority to vote" on a physical proxy card thus appears to
describe at the voting level what it means to "withhold[] . . . a proxy" under 3 AAC
08.365(16)(B). And it refers to the act of not voting for a specific candidate by checking
a box or "striking out the name of that nominee." Ahmasuk's opinion letter did not ask
anyone to make or withhold specific votes in a proxy card.
This is a logical interpretation when compared to the other acts listed in
3 AAC 08.365(16), as striking out a specific nominee's name - i.e., voting against that
candidate - would be the direct inverse of "procur[ing]" or "execut[ing]" the authority
to vote for a specific candidate. Any broader reading would lead to absurd results.
Again, would Ahmasuk have violated these provisions if, for example, he instead had
implored shareholders to simply vote in person? If not, why would imploring
shareholders to vote by directed proxy rather than discretionary proxy have a different
result? Although the ALJ noted that "any proxy type may significantly affect an
election," impact alone does not constitute a proxy solicitation.
The Division's interpretation and application of its proxy solicitation
regulation are unreasonable on the facts of this case.66 Without reaching the
constitutional issues Ahmasuk raises, we reverse the superior court's decision upholding
the Division's order sanctioning Ahmusuk. We remand to the superior court to dismiss
64 3 AAC 08.335(e)(2) (emphases added).
65 3 AAC 08.365(12).
66 See supra note 37 and accompanying text.
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the Division's complaint against Ahmasuk and to reevaluate prevailing party status for
purposes of an attorney's fees award. 67
V. CONCLUSION
WeREVERSEthesuperior court's decisionupholding theDivision'sorder
sanctioning Ahmasuk and REMAND for further proceedings consistent with this
opinion.
67 We reiterate that context and facts are key. Our decision should not be read
to automatically extend beyond this context and these facts. "In every case we decide
what we decide, and nothing more." Planned Parenthood of the Great Nw. v. State , 375
P.3d 1122, 1135 (Alaska 2016).
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