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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Lucas Borer v. The Eyak Corporation (4/1/2022) sp-7588
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.gov.
THE SUPREME COURT OF THE STATE OF ALASKA
LUCAS BORER, )
) Supreme Court No. S-17805
Appellant, )
) Superior Court No. 3AN-19-10107 CI
v. )
) O P I N I O N
THE EYAK CORPORATION, )
) No.7588 - April 1, 2022
Appellee. )
)
A
ppeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Gregory A. Miller, Judge.
Appearances: Lucas Borer, pro se, Cordova, Appellant. Matt
MeadandAndrewErickson,LandyeBennettBlumsteinLLP,
Anchorage, for Appellee.
Before: Winfree, Chief Justice, Maassen, and Borghesan,
Justices. [Carney, Justice, not participating.]
BORGHESAN, Justice.
I. INTRODUCTION
A winning candidate for a seat on the board of directors of an Alaska
NativeCorporationdeclinedto sign thecorporation's confidentialityagreement and code
of conduct. When the corporation denied him a seat on the board, he sought a
declaratory judgment that these agreements are unlawful and an injunction that he be
seated on the board. He argues that the scope of the confidentiality agreement is so
----------------------- Page 2-----------------------
broad, and the code of conduct so apt to be used to suppress dissenting directors, that
they are inconsistent with directors' fiduciary duties to the corporation. Because he does
not challenge the application of these agreements to any concrete factual situations, we
conclude that his claims are not ripe for adjudication. We therefore affirm the judgment
and the award of attorney's fees against him.
II. FACTS AND PROCEEDINGS
A. Facts
The Eyak Corporation is the Alaska Native Village Corporation for
1 Eyak's board
Cordova, formed pursuant to the Alaska Native Claims Settlement Act.
is made up of nine members who serve staggered three-year terms; each year, three
directors are up for election. Eyak's bylaws require several qualifications to serve on the
board. Only one qualification is in dispute here: "Any person who is elected or selected
to be a Director shall be seated as a Director only after he or she executes an
acknowledgment agreeing to comply with the Corporation's code of conduct and
executestheCorporation'sconfidentialityagreement." Therequirementto executethese
two documents (collectively referred to as the Agreements) has been in place since 2012.
Lucas Borer previously served on the Eyak board from 1985-1989 and ran
for the board again unsuccessfully in 2012, 2015, 2017, and 2018. In 2015 Borer
corresponded with the chair of Eyak's board of directors, criticizing Eyak's bylaws and
the Agreements. Eyak declined to amend its governing documents at that time.
Borer ran again in 2019. At the top of the candidate application form, the
qualifications for directors were clearly stated. Borer signed the form, right below a
statement that read: "I understand that the information set forth above will be relied
1
See generally 43 U.S.C. § 1607.
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upon by The Eyak Corporation in the preparation of its election materials for the
upcoming Annual Meeting of Shareholders."
Borer received enough votes in theelectionto win one of the three available
seats on the board. At a board meeting following the election Borer and the two other
winning candidates were asked to execute the Agreements before they were seated.
Borer asked for more time to review the Agreements with his counsel before he signed
them. Because Borer did not execute the Agreements at the meeting, Eyak did not allow
him to be seated as a director at that time.
Thechair ofEyak's board ofdirectorssent Borer aletter congratulatinghim
on his election, attaching the Agreements, and advising him that he must execute the
Agreements to qualify to be seated as a director under the bylaws. The chair emphasized
that the board wanted "to make sure the shareholders who voted for [Borer] are not
disenfranchised while timely-seating elected directors and avoiding vacant seats on the
Board." The chair requested that Borer execute the Agreements by May 28, 2019, or
else Eyak would "proceed to fill the vacancy."
Four days before the execution deadline, Borer responded with a letter
addressed to the board. Borer claimed that he had been pressured to sign the Agreements
and that, "[h]aving seen . . . a similar document in the past, [he] suspected that this one
would similarly attempt to take away or reduce [his] rights as a board member."
Borer then outlined numerous issues with the Agreements that he claimed
would result in breach of fiduciary duty and violation of Alaska law - including many
that are now the basis for his appeal. Borer stated that although he "completely
underst[ood] the need for a reasonable Code of Conduct" he claimed that the
Agreements "effectively prohibit any communication between a director and a
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2
shareholder." He maintained that he was not required to sign the Agreements to qualify
for the board, asserting that he had "legitimate and legal reasons for not signing the
[Agreements]" and that executing the Agreements "would represent an abdication of
[his] responsibilities as a director."
Eyak responded in a June 27 letter to Borer stating that it had revised the
Agreements in response to his concerns. Eyak gave Borer a new deadline of July 11 to
execute the revised Agreements and again notified him that if he failed to do so, the
board would give his seat to someone else.
Borer did not sign the Agreements prior to the July 11 deadline; it appears
that he never responded at all. On July 17 Eyak notified Borer that it had seated another
eligible candidate as director to fill the vacancy.
Borer's attorney sent a letter to Eyak demanding that Borer be seated on the
board. The letter stated that "[i]nviting shareholders to vote for an ineligible candidate
is a misleading proxy solicitation" and reiterated many of Borer's concerns from his
earlier letter to the board. He also proposed further revisions to the Agreements.
Eyak refused Borer's demand. Citing its bylaws, Eyak stated that it had
"been clear with its shareholders and Mr. Borer at every step of the nominations and
election process that only eligible candidates who execute [the Agreements] will be
qualified to be seated as directors."
B. Proceedings
Borer filed a complaint for declaratory and injunctive relief in the superior
court. Borer sought "a declaratory judgment stating he remains a duly elected [Eyak]
director and an injunction requiring [Eyak] to seat him on its board." He claimed that
he was validly elected and that signing the Agreements "would reduce or eliminate his
2
The italics appear in the original document.
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ability to exercise his fiduciary duty to the corporation." Borer also took issue with
various enforcement provisions of the Agreements, including provisions that he claimed
would "eliminate the director's ability to participate in board meetings and eliminate the
director's statutory right to inspect corporate information." Borer also filed a motion for
preliminary injunction directing that Eyak seat him as director. In that motion, Borer
stated "he had just been handed [the Agreements] th[e] morning" of the board election.
Eyak opposed the motion for preliminary injunction and disputed Borer's
characterization of the facts. Eyak argued that Borer had "full knowledge of the Code
ofConduct and Confidentiality Agreement'sprovisionsandpurpose,"pointing to several
pieces of evidence: a newsletter issued to shareholders describing Eyak's director
confidentiality agreement; Borer's previous campaigns for the director seat;
correspondence between Borer and the chair of the board regarding the Agreements in
2015; and the fact that Borer had "affirmatively represented his agreement to be bound
by those documents in the event he was elected when he signed and returned the 2019
Candidate Application Form."
The superior court denied Borer's motion for preliminary injunction. The
court first noted that "[w]hen this court read Mr. Borer's opening motion, this court was
left with the impression that Mr. Borer had no prior notice of the Code of Conduct, that
the document was essentially thrust upon him minutes before the vote, and that the
document may even have been drafted or at least revised specifically to limit him if he
won," but that Eyak's opposition and attached exhibits "ma[de] clear that that was not
the case." The court ruled that Borer had not met his legal burden of demonstrating
either a "clear showing of probable success on the merits" or "substantial questions
going to the merits of the case." It found that "Borer [had] not shown that he will suffer
irreparable harm, or that [Eyak] won't." It also found that Eyak could be irreparably
harmed if Borer were seated without signing the code of conduct because the code
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"insures against a director improperly disclosing . . . confidential corporate business
opportunities." Borer moved for reconsideration, which the superior court denied.
Eyak then moved for summary judgment, arguing that Borer was not
qualified to be seated as a director due to his failure to sign the Agreements and that its
code of conduct and confidentiality agreement do not violate Alaska law. Eyak argued
that Borer "asks for the extraordinary: invalidation of a corporation's bylaws based on
a series of hypothetical events and the removal of a qualified, sitting director to seat an
unqualified director."
The superior court heard oralargumentandsubsequently granted summary
judgment to Eyak in a decision on the record. The court stated without elaboration that
"[e]verything is ripe" for adjudication. The court then determined that "[t]here are no
disputed material facts," observing that Borer had refused to sign Eyak's Agreements
despite agreeing to do so on the candidate application form and that signing the
Agreements was a requirement to become an Eyak director. The court also determined,
pointing generally to "Alaska statutes that permit [corporate] bylaws to define . . . codes
of conduct[] and board governance," that Eyak's requirement to sign the Agreements
was "a requirement that squares with the law." The court also indicated that it viewed
Borer's challenges as merely hypothetical, referring to decisions of Delaware courts that
declined to strike down corporate bylaws based on "hypothetical risk of harm." 3
Eyak moved for 20% of its attorney's fees under Alaska Civil Rule
82(b)(2), which the court granted. Borer appeals the grant of summary judgment, the
denial of his motions for summary judgment and preliminary injunction, and the award
of attorney's fees.
3 E.g., Stroud v. Grace, 606 A.2d 75, 96 (Del. 1992).
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III. STANDARD OF REVIEW
4
We review a grant of summary judgment de novo.
Whether an issue is ripe
5
for adjudication is a legal determination that we consider de novo. We review an award
6
and will reverse "only if the award is 'arbitrary,
of attorney's fees for abuse of discretion
7
capricious, manifestly unreasonable, or stems from improper motive.' "
IV. DISCUSSION
A. Borer's Challenge To The Corporation's Code Of Conduct And
Confidentiality Agreement Is Not Ripe For Adjudication.
Borer's claimthat he was validly elected as a director hinges upon his view
that the Agreements are unlawful. Eyak's bylaws required Borer to sign the Agreements
8
in order to be seated as a director, and when Borer refused to do so, Eyak in turn refused
to seat Borer. Borer argues that because the Agreements are unlawful, the bylaws'
4 Parker v. Tomera, 89 P.3d 761, 765 (Alaska 2004).
5 State v. ACLU of Alaska , 204 P.3d 364, 368 (Alaska 2009).
6 Nichols v. State Farm Fire & Cas. Co., 6 P.3d 300, 303 (Alaska 2000).
7 Id. (quoting Jones v. Jones, 925 P.2d 1339, 1340 (Alaska 1996)).
8 Eyak's b ylaws mandate: "Any person who is elected or selected to be a
Director shall be seated as a Director only after he or she executes an acknowledgment
agreeing to comply with the Corporation's code of conduct and executes the
Corporation's confidentiality agreement."
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9
requirement that he sign them cannot lawfully be enforced, so Eyak had no valid
grounds to refuse to seat Borer as director. 10
A threshold issue in this case is which versions of the Agreements are
relevant in this dispute: the versions in effect when Borer was initially elected in May
2019, or the versions that Eyak revised in June 2019 in response to Borer's concerns.
Borer argues that the earlier versions of the Agreements are relevant because they were
in effect when his qualifications as a director were being determined at the May 2019
board meeting. That is not correct. The board revised the agreements in light of Borer's
concerns and then gave him an opportunity to be seated as a director if he signed them.
In other words, Eyak determined Borer was not eligible because he did not sign the
revised agreements. We therefore consider the revised Agreements in our analysis.
Borer's argument in a nutshell is that were he to sign the Agreements as a
condition of being a director of the board, the Agreements would impermissibly burden
his ability to fulfill his fiduciary duties to the corporation. Under Alaska law a director
has a fiduciary duty to act in good faith, to act in a manner he or she reasonably believes
to be in the best interests of the corporation, and to act with care.11 Borer identifies six
9 A corporation's internal governance rules must not be contrary to law.
AS 10.06.230(e) ("The bylaws may contain any provision, not in conflict with law or the
articles of incorporation, for the management of the business of the corporation and for
the conduct of the affairs of the corporation, including . . . the qualifications . . . of
directors.").
10 Except for the limited means prescribed by the corporations code, "a
director may not be removed before the expiration of the term of office of the director."
AS 10.06.460(b). Eyak's bylaws also specify that "[n]o director may be removed from
office before the expiration of his term except as provided [in the bylaws]," which
prescribe limited procedures for removal.
11 AS 10.06.450(b); Holmes v. Wolf, 243 P.3d 584, 598-99 (Alaska 2010)
(continued...)
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aspects of the Agreements he was required to sign that, in his view, would preclude him
from fulfilling those duties:
(1) the lack of reporting procedures for illegal activity;
(2) the failure to provide for an impartial disciplinary tribunal;
(3) the scope of the confidentiality agreement;
(4) the requirement to acknowledge that the Board acts "as a group and not
individuals";
(5) the sanction of withholding travel funds; and
(6) the sanction of restricting a director's access to confidential information.
The first two problems can be addressed summarily. Borer's argument that
the confidentiality agreement makes no exception for reporting illegal activity is based
on the prior version of the agreement that is no longer in effect. In response to Borer's
concerns, Eyak added language clarifying that its confidentiality code does not "limit [a
director's] duty to report a violation of law." As explained above, it is the updated
version of the Agreements we are reviewing on appeal. Therefore this particular critique
is moot, and we decline to address it.12
Borer's second argument is that the corporation's disciplinary process for
board members does not provide an impartial tribunal and therefore violates the Due
11 (...continued)
(citing AS 10.06.450(b) and describing director's statutorily prescribed duties as
LETCHER CYC. C ORP. § 837.50 (2021) ("[A] director
"fiduciary dut[ies]"); accord 3A F
or officer of a corporation owes the corporation complete loyalty, honesty, and good
faith.").
12 Ahtna Tene Nené v. State, Dep't of Fish & Game , 288 P.3d 452, 457
(Alaska 2012) (explaining that we refrain from deciding moot questions, particularly
where declaratory relief is sought).
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13
Process Clause of the Fourteenth Amendment. But Borer waived this argument by
14
failing to raise it before the superior court.
15 Borer
The remainder of Borer's challenges are not ripe for adjudication.
asks this court to strike down a corporation's internal governance rules even though
those rules have not yet been applied to him in a concrete factual scenario. Eyak, citing
Delaware law, argues that Borer cannot challenge corporate internal rules based on
hypothetical abuses. Although Eyak is correct that Delaware courts "typically decline
to decide issues . . . that create hypothetical harm,"16 we see no need to adopt Delaware
13 McMullen v. Bell , 128 P.3d 186, 190 (Alaska 2006) ("Ordinarily 'this court
will not consider an issue raised for the first time on appeal.' " (quoting State v. Nw.
Constr., Inc. , 741 P.2d 235, 239 (Alaska 1987))). Borer argues that Eyak first raised the
due process issue before the superior court, but this is not quite accurate. Eyak did
mention "due process" in its opposition to Borer's motion for preliminary injunction, but
it did so as an analogy to support the validity of its discretionary sanction procedures -
not to raise due process as a separate issue.
14 In any event Eyak is a private corporation, not a governmental entity, and
therefore is not bound by the requirements of due process. See Anderson v. Alaska Hous.
Fin. Corp., 462 P.3d 19, 26 (Alaska 2020) (explaining that due process clause applies
only to governmental actors, including government-controlled corporations). Although
Borer emphasizes that Eyak receives over 90% of its revenue from the government,
Eyak's board is elected by its shareholders - not the government. Borer thus cannot
claimthat Eyak is a government-controlled corporation subject to thedue process clause.
Id. at 26 (holding that corporation was "wholly controlled by the [s]tate" because "[a]ll
seven members of [corporation's] board [we]re government officials or appointed by the
governor").
15 The superior court concluded without analysis that "[e]verything is ripe."
But because whether a claim is ripe for adjudication is a question of law, we review this
issue de novo. State v. ACLU of Alaska, 204 P.3d 364, 368 (Alaska 2009).
16 Boilermakers Loc. 154 Ret. Fund v. Chevron Corp., 73 A.3d 934, 940 (Del.
Ch. 2013) (quoting 3 STEPHEN A. R ADIN, T HE BUSINESS JUDGMENT RULE : FIDUCIARY
(continued...)
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rules here. Our ripeness doctrine aptly deals with the question of whether it is
appropriate to render declaratory judgment based on hypothetical applications of the
challenged law.
Alaska'sdeclaratory judgment actrequirestherebean "actual controversy"
17 This requirement "reflects a general constraint
for a court to issue declaratory relief.
on the power of courts to resolve cases,"18 cautioning that courts should not "resolve
abstract questions of law."19 Ripeness is an element of the "actual controversy"
requirement.20
A ripe suit will present "a substantial controversy, between parties having
adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment."21 The primary concern of ripeness is "whether the case involves
uncertain or contingent future events that may not occur as anticipated, or indeed may
not occur at all."22 The doctrine of ripeness thus "requires a plaintiff to claim that either
16 (...continued)
DUTIES OF CORPORATE OFFICERS 3498 (6th ed. 2009)).
17 ACLU of Alaska , 204 P.3d at 368.
18 Id.
19 Id. at 369 (quoting Bowers Office Prods., Inc. v. Univ. of Alaska , 755 P.2d
1095, 1097-98 (Alaska 1988)).
20 Id. at 368. Mootness and standing are the other elements of the "actual
controversy" requirement. Id.
21 Id. at 369 (quoting Brause v. State, Dep't of Health & Soc. Servs., 21 P.3d
357, 359 (Alaska 2001)).
22 Brause, 21 P.3d at 359 (quoting 13A CHARLES ALAN WRIGHT ET AL.,
FEDERAL PRACTICE AND PROCEDURE § 3532, at 112 (2d ed. 1984)).
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23
a legal injury has been suffered or that one will be suffered in the future." There is no
24
"set formula" for determining ripeness.
Instead, we balance "the fitness of the issues
for judicial decision" with "the hardship to the parties of withholding court
25 As a part of this balancing test, we consider whether "concrete factual
consideration."
scenarios" would assist in bringing about the "ultimate resolution of the issue before
us."26
In State v. ACLU of Alaska the plaintiffs brought a pre-enforcement suit
challengingtheconstitutionalityofastatestatuteprohibiting marijuanapossession.27 We
held that the challenge was unripe.28 We assessed hardship, which we determined was
"slight" because the sole hardship alleged - the risk of criminal liability for marijuana
possession - already existed under federal law prohibiting marijuana possession.29 We
assessed fitness for decision, emphasizing that our analysis about the statute's
constitutionality "could be aided by one or more concrete factual scenarios."30 We
discussed the possibility of "cases where . . . the statute could permissibly be applied"
without constitutional problem, reasoning that adjudication of "an actual case, or several
23 Id.
24 Id.
25 ACLU of Alaska , 204 P.3d at 369 (quoting Brause, 21 P.3d at 359).
26 Id. at 373.
27 Id. at 366.
28 Id. at 373-74.
29 Id. at 369-71, 374.
30 Id.
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31
actual cases" could cast the issues presented "in a different light." We concluded that
given the potential for concrete facts to aid the decision and the limited hardship to the
32
parties of withholding a decision, the case was not ripe for adjudication.
In this case, too, the risks of making a decision without concrete facts
outweigh the harm of withholding a decision. There is no doubt that Borer will suffer
some hardship if we decline to adjudicate his claims: he will lose his legal claim to a
directorship on Eyak's board and the incumbent rights and duties that he would gain as
a director. Yet it is worth noting that Borer has contributed to this hardship himself by
rejecting the Agreements out of hand without waiting to see whether they would actually
place him in a position of being unable to fulfill his fiduciary duties. And this hardship
for Borer must be weighed against the fitness of his claims for adjudication.
Because Borer does not allege any concrete factual scenarios where the
Agreements are being applied, he fails to show precisely how, and to what degree, the
Agreements are in tension with a director's fiduciary duties. Although it is certainly
possible to imagine overbroad or abusive applications of these Agreements, his "pre-
enforcement" challenge leaves us uncertain whether the Agreements would actually be
used in those ways. Indeed, there is far greater uncertainty about how the relatively
general terms of these Agreements would be applied to specific factual scenarios than
there was when we concluded that a pre-enforcement challenge to laws prohibiting
33 Borer's claims require us to decide whether Eyak's
marijuana possession was unripe.
Agreements are in irreconcilable tension with a director's fiduciary duties. As explained
31 Id. at 372.
32 Id. at 373-74.
33 Id.
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in detail below, we cannot confidently answer that question without seeing how the
challenged terms of these agreements are applied to real-world situations.
1. Scope of the confidentiality agreement
Borer argues that Eyak's confidentiality agreement is overbroad. The
agreement states, in relevant part:
1. I understand and acknowledge that as a director of the
Corporation, I will review and consider a variety of
confidential and sensitive information. "Confidential
Information" may include any number of different forms, and
includes, but is not limited to business, operation, finance,
strategic, personnel, litigation, executive session, and other
proprietary information of The Eyak Corporation and its
subsidiaries and affiliates. . . . Confidential Information does
not include information that has been made public by the
Corporation. I agree that if I am unsure whether information
is confidential, I will treat it as confidential.
. . . .
3. I will keep all Confidential Information private and
confidential, and will use my best efforts to prevent
inadvertent or unauthorized disclosure. I will not, without
prior written consent of the Corporation, disclose
Confidential Information to anyone. I will only use
Confidential Information in furtherance of my duties as a
Director.
Borer claims that the expansive definition of "confidential information" in the agreement
would render "literally anything" confidential, so that signing the agreement could
prevent him from discussing even innocuous matters like "the outlook for the coming
fiscal year" with shareholders. He argues that this will prevent him from representing
and advocating for shareholders on the board.
At the outset we observe that a board of directors has a duty of "complete
candor to its shareholders to disclose all germane or material information," and this duty
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34
"applies to matters of corporate governance as well as to corporate transactions." We
presume Eyak's board is aware of this general fiduciary duty and that the confidentiality
agreement will be construed and applied in light of this duty.
Borer's argument relies on Pederson v. Arctic Slope Regional Corp. , in
which we determined that a corporate confidentiality agreement was "unreasonably
35 When the
broad" as applied to a shareholder's request for corporate documents.
shareholder refused to sign a confidentiality agreement, the corporation withheld
requested documents fromtheshareholder.36 Werecognizedaconfidentialityagreement
may be appropriate if it "reasonably defines the scope of what is confidential information
subject to the agreement" and has provisions "that are not unreasonably restrictive in
light of the shareholder's proper purpose and the corporation's legitimate confidentiality
37 Applying those standards to the specific documents requested by the
concerns."
shareholder, we concluded that the confidentiality provisions were "unreasonably
restrictive, at least as they related to executive compensation and stock interests"
especially taking into account the burden these restrictions placed on the shareholder's
purpose of "making use of disclosed information to organize his fellow shareholders to
restrict" certain types of transactions by the corporation's executives.38
34 3A FLETCHER CYC. CORP. § 837.70 (2021).
35 331 P.3d 384, 403 (Alaska 2014). Under Alaska law, a corporation "shall
make its books and records of account . . . reasonably available for inspection . . . by a
shareholder of the corporation." AS 10.06.430(b).
36 Pederson, 331 P.3d at 388-90.
37 Id. at 402.
38 Id. at 403.
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Pederson is distinguishable because we could determine in that case
whether the confidentiality provisions were reasonableas applied to specificinformation
sought for a particular purpose. We do not have those concrete facts here. Instead we
have a range of information that might be deemed confidential. According to the
confidentiality agreement, confidential information "may include" information from
various categories such as "business, operation, finance, strategic, personnel, litigation,
executive session, and other proprietary information," but the agreement does not
suggest that all information within these categories will be deemed confidential. Each
category covers a wide range of information, and the justification for treating particular
types of information within each category will vary significantly. For example, the
category of "litigation" information includes attorney-client confidences as well as
information stated in documents filed in court. It is unquestionably proper to treat the
former type of information as confidential, and unquestionably improper to treat the
latter as confidential (as court-filed documents have already been publicly disclosed).
Because we are not presented with a situation in which Eyak has deemed specific pieces
of information confidential, it is difficult to assess the justification for that label, or how
treating that information as confidential affects a director's exercise of fiduciary duties.
This difficulty is compounded by the fact that a director's fiduciary duties
are themselves general maxims: to act in good faith, for the best interests of the
39 Determining a director's adherence to these duties is
corporation, and with due care.
a highly fact-specific inquiry.40 Accordingly, whether having to keep information
confidential is compatible with a director's fiduciary duties depends not only on what
39 AS 10.06.450(b).
40
See 3A FLETCHER CYC. C ORP. § 837.50 (2021) ("Generally, any alleged
breach of a fiduciary duty is a question for the trier of fact after examination of all the
evidence.").
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information is at issue, but also the specific factual circumstances that arguably require
the director to disclose this information. Trying to decide whether the confidentiality
agreement is compatible with a director's fiduciary duties when we do not know what
information has been deemed confidential and why the director believes it should be
disclosed would substantially elevate the risk of an erroneous decision. For that reason,
the question whether Eyak's confidentiality agreement may in some instances be
inconsistent with a director's fiduciary duties to the corporation is not ripe for
adjudication.
2. Director's duty to acknowledge that director "shall not
undermine public or shareholder confidence in the board"
Borer challenges a provision in the code of conduct that requires directors
to acknowledge that the Board acts "as a group and not individuals." The relevant
language reads:
[E]ach director shall: . . . acknowledge that the Board acts as
a group and not individuals, and once the Board has acted, a
director may seek change through Board action, but shall not
undermine public or shareholder confidence in the Board or
the Corporation.
Borer argues that the requirement is unlawfully restrictive because it would prohibit
directors frompublicly expressing dissent to shareholders, in contravention of directors'
fiduciary duties.
Without concrete facts, it is difficult to assess the degree of tension between
the somewhat vague rule that a director may not "undermine public or shareholder
confidence" in the board or corporation and the scope of a director's fiduciary duties
when the director disagrees with the action being taken. Under Alaska law a director has
a fiduciary duty to act in good faith, to act in a manner the director reasonably believes
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41
to be in the best interests of the corporation, and to act with care. Alaska law also
recognizes a director's "right to dissent" from corporate action, which may be recorded
42 But
in the minutes of a board meeting or filed in writing immediately after the meeting.
there is ample room for a director to register dissent from corporate action without
undermining confidence in the board. No facts in the record suggest that this proviso
would be used to "muzzle [the] minority" as Borer, quoting a Delaware case, asserts.43
And we can envision circumstances in which enforcing this provision might be justified.
The Delaware case Borer quotes provides one example: acting on one's disagreement
with a particular corporate action by trying to persuade investors to abandon the
corporation would seem contrary to a directory's duty of loyalty to the corporation.44 In
these circumstances, the corporation might be justified in finding that the director has
violated this proviso and sanctioning the director accordingly. We decline to adjudicate
the lawfulness of this proviso absent its application to concrete facts that can help us
accurately resolve whether it is inconsistent with a director's fiduciary duties to the
corporation.
41 AS 10.06.450(b).
42 AS 10.06.450(e).
43 Shocking Techs., Inc. v. Michael, No. 7164-VCN, 2012 WL 4482838, at
*11 (Del. Ch. Oct. 1, 2012), vacated on other grounds, Shocking Techs., Inc. v. Michael,
No. 7164-VCN, 2015 WL 3455210 (Del. Ch. May 29, 2015).
44 See id. at *1, *9-11 (holding that director who had disclosed company's
confidential information to "dissuade the only remaining potential investor from
investing in the [c]ompany" in order to further the director's personal goals had breached
duty of loyalty).
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3. Board's authority to sanction director by withholding travel
expenses
45
A director has a fiduciary duty of care, and habitual failure to attend board
46
meetings may violate that duty.
Invoking this duty, Borer challenges two provisions
in Eyak's code of conduct that authorize withholding a director's compensation and
travel expenses if the director violates the code:
[A] director who is found through the [disciplinary]
procedure to have violated the provisions of this Code of
Conduct shall be subject to any or all of the following
sanctions: . . . cessation of eligibility to receive all other
forms of compensation including travel expenses.
. . .
[A] director who fails to (1) comply with all disclosure
requirements . . . , (2) execute an acknowledgment agreeing
to comply with this Code of Conduct, (3) execute the
Corporation's Confidentiality Agreement, or (4) swear an
oath of allegiance to the Corporation . . . , shall be ineligible
to receive meeting fees, and other forms of compensation,
including travel expenses. Once the director's failure has
been rectified, he or she shall become eligible to receive all
forms of compensation to which he or she is otherwise
entitled as a director.
Borer argues that withholding travel reimbursement is an unlawful sanction because it
would cause the sanctioned director to miss board meetings and therefore violate the
director's fiduciary duty.
45 AS 10.06.450(b).
46 3A F LETCHER CYC. C ORP. § 1049 (2021) ("Mere failure of a director to
attend a meeting of the board is not necessarily an actionable breach of the director's
duty of care . . . [but] a director habitually missing meetings may be a basis for breach
of the duty of care.")
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The only fact that Borer has alleged to support this challenge involves a
former director who told Borer he was "denied travel to board meetings and had to attend
telephonically because of a dispute over his compliance with the code of conduct." The
fact of telephonic participation itself does not establish that the director's ability to
participate in board meetings was meaningfully hindered. Although Borer asserts in
conclusory fashion that having to attend a meeting telephonically or virtually puts
sanctioned directors at a disadvantage by reducing opportunities for participation, that
is not an inevitable result of remote participation. And even if remote participation is
somewhat less effective or unwieldy, it does not follow that these minor disadvantages
47 Absent concrete facts that illustrate
result in a violation of the director's duty of care.
precisely how remote participation in a meeting of the board of directors might impair
a director's fiduciary duty, we decline to adjudicate the lawfulness of withholding travel
expenses as a sanction for noncompliance with the corporation's rules for directors.
4. Board's authority to sanction director by barring access to
corporate information
Borer challenges a provision in the code of conduct that permits the board
to sanction directors by barring them from reviewing any proprietary or confidential
information. The relevant provision reads:
[A] director who breaches the Confidentiality Agreement . . .
(demonstrated by a 2/3 vote of the remaining directors) shall
not be entitled to review any proprietary or confidential
47 Borer hypothesizes certain scenarios, like a telephone or internet outage,
that would result in a director attempting to participate remotely being unable to attend
the meeting at all. But the possibility of logistical problems is always present, even if the
corporation is paying a director's travel expenses. A director might miss the meeting
because bad weather prevents the plane from flying. We do not think a director in this
situation has failed to uphold fiduciary duties to the corporation.
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information unless and until the Board determines the breach
has been rectified.
Borer argues that this sanction would violate directors' statutorily protected "absolute
right" to inspect corporate documents. 48
Although we have not addressed whether this right is truly "absolute,"49
Borer himself suggests that it is not. He argues that access to information may be
restricted in some circumstances, such as when a director has "clear intent to use the
documents to commit an egregious tort" against the corporation. His position is
consistent with case law interpreting California's virtually identical statute.50 California
48 AS10.06.450(d) providesdirectors with an "absoluteright"to"inspect and
copy all books, records, and documents . . . of the corporation."
49 We have addressed various aspects of the director inspection statute, but
not this precise question. See, e.g., Henrichs v. Chugach Alaska Corp., 260 P.3d 1036,
1041 (Alaska 2011) (concluding that while directors were permitted to "inspect and
copy" records there was no attendant right for the corporation to "actively deliver the
shareholder records to directors or shareholders who request them"); Rude v. Cook Inlet
Region, Inc., 294 P.3d 76, 93 (Alaska 2012) (rejecting as moot a former director's claim
of absolute entitlement to inspect "information related to the management of the
corporation" because he was no longer a director).
50 Alaska's director inspection statute is essentially identical to California's,
which differs from the current Model Business Corporation Act and the statutes of most
other states. Compare AS 10.06.450 ("A director has the absolute right at a reasonable
time to inspect and copy all books, records, and documents . . . of the corporation."), and
Cal. Corp. Code § 1602 (1975) ("Every director shall have the absolute right at any
reasonable time to inspect and copy all books, records and documents . . . of the
corporation of which such person is a director . . . ."), with MODEL BUS. C ORP. A CT
§ 16.05 (AM. BAR ASS'N 2016) ("A director of a corporation is entitled to inspect and
copy the books, records and documents of the corporation at any reasonable time to the
extent reasonably related to the performance of the director's duties as a director . . . ."),
and Del. Code Ann. tit. 8, § 220(d) (2010) ("Any director shall have the right to examine
the corporation's stock ledger, a list of its stockholders and its other books and records
(continued...)
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courts have construed a director's statutory "absolute" right to inspect corporate records
51
to contain certain limitations.
California courts have held that "[t]o be entitled to
inspect corporate records, directors must remain disinterested and independent in the
52 Therefore "[t]he absolute right . . . is subject to
performance of their fiduciary duties."
exceptions and may be denied where a disgruntled director announces his or her
intention to violate his or her fiduciary duties to the corporation, such as using inspection
rights to learn trade secrets to compete with the corporation."53
We decline to decide in a factual vacuum whether Alaska's similar statute
contains similar exceptions and whether this proviso of Eyak's code of conduct is
consistent with any such exceptions. In ACLU of Alaska we reasoned that the law
prohibiting possession of marijuana might be subject to a "narrowing construction" that
would "uphold[] the statute in cases directly involving the health and safety goals on
which the statute is based."54 In answering the question of how the statute should be
construed, we concluded that "[a]llowing the normal processes of adjudication to take
55 The same is true here, when determining whether this
place may be of assistance."
corporate proviso may be lawful requires us to first construe the scope of the statutory
50 (...continued)
for a purpose reasonably related to the director's position as a director.").
51 9 WITKIN, SUMMARY OF CALIFORNIA LAW § 94 (11th ed. 2021) (in
California a director's "absolute right to inspect does not mean unlimited access").
52 Wolf v. CDS Devco, 110 Cal. Rptr. 3d 850, 862 (2010).
53 Tritek Telecom, Inc. v. Superior Ct., 87 Cal. Rptr. 3d 455, 459 (2009).
54 204 P.3d 364, 373 (Alaska 2009).
55 Id .
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right to inspection. Attempting to define those contours "in the absence of actual facts"
56
would elevate the risk of erroneous decision.
And as was true of the arguments in favor of deciding a preenforcement
challenge in ACLU of Alaska , Borer's fear that this proviso will be applied to him "may
be speculative and overstated."57 Borer offers little reason to think that his concern is of
"sufficient immediacy and reality to warrant the issuance of a declaratory judgment."58
Borer has submitted the affidavit of Jason Barnes, who served as a director from 2010 -
2013. Barnes stated that his efforts to obtain corporate records to "substantiate the
annually reported financial figures of [Eyak] subsidiaries" was improperly denied by the
Board's chairman under the guise of a breach-of-confidentiality sanction. Barnes's
affidavit, taken as true, indicates that the chairman abused the sanction to hinder Barnes's
59 But the assertion of one instance of abuse almost a
performance of fiduciary duties.
decade ago gives little support for us to conclude that there is substantial risk that two-
thirds of the Eyak Board will vote, under false pretenses, to deny other directors'
statutory right to inspect corporate documents.
In sum, Borer's challenges to Eyak's corporate governance documents are
not ripe for decision. Absent concrete facts, it is uncertain how they will be applied and
whether these hypothetical applications would beunlawful. Borer's positionis, in effect,
56 Id .; see also Sands ex rel. Sands v. Green , 156 P.3d 1130, 1134 (Alaska
2007) ("[I]t is not surprising that a concrete case involving a concrete factual scenario
has uncovered a previously unanswered question.").
57
204 P.3d at 371.
58
Id . at 369 (quoting Brause v. State, Dep't of Health & Soc. Servs., 21 P.3d
357, 359 (Alaska 2001)).
59 Barnes's affidavit suggests that he and other board members believed there
was no "breach" of confidentiality to properly trigger the sanction.
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that any person elected to be a director of a corporation may obtain a declaratory
judgment that particular corporate governance rules are invalid because they might be
abused in specific factual situations that have not occurred yet and may not occur at all.
The ripeness doctrine cautions against precisely this approach because deciding cases in
a factual vacuum creates risks of erroneous decisions and devotes judicial resources to
60 We therefore decline Borer's invitation to
problems that may never materialize.
adjudicate these claims and affirm the superior court's judgment for Eyak.61
B. It Was Not An Abuse Of Discretion To Award Eyak 20% Of Its
Attorney's Fees Under Civil Rule 82.
The superior court deemed Eyak the prevailing party and awarded it 20%
of its attorney's fees, totaling $17,780. Borer appeals this decision. He does not
challenge the superior court's prevailing party designation, but instead challenges the
decision to award fees and the amount awarded.
A trial court has "broad discretion to award fees and to alter the amount it
62 When "the prevailing party recovers no money judgment," Alaska
intends to award."
Civil Rule 82(b)(2) instructs courts to "award the prevailing party in a case resolved
without trial 20 percent of its actual attorney's fees which were necessarily incurred."
60 Brause, 21 P.3d at 359-60.
61 Because we affirm the grant of summary judgment to Eyak, Borer's
preliminary injunction argument - that the superior court erred in denying his request
to require Eyak to seat him as a director - is moot. See Roach v. First Nat'l. Bank of
Anchorage , 643 P.2d690,690-91 (Alaska1982) (agreeing preliminaryinjunctionshould
be dissolved after underlying claims dismissed).
62 Boiko v. Kapolchok, 426 P.3d 868, 876 (Alaska 2018) (quoting Cizek v.
Concerned Citizens of Eagle River Valley, Inc., 71 P.3d 845, 851 (Alaska 2003)).
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63
Any award made pursuant to Rule 82 is "presumptively correct" but "may be set aside
64
for 'compelling reasons.' "
None of the reasons Borer offers for why the court should have reduced or
eliminated the fee award is compelling. First, Borer claims that Eyak's attorney
"expressly threatened Borer regarding the fee award prior to this litigation." But the only
evidence in the record of a "threat" is the attorney's letter notifying Borer that Eyak
would not seat him as director. The letter alludes to the possibility of an adverse fee
award, stating that Eyak was "confident that a court will not view Mr. Borer as a 'public
interest litigant.' " This statement was not improper: advising the opposing party of a
financial cost of litigation, without more, is not some improper tactic warranting a
reduction in attorney's fees.65
Second, Borer appears to invoke Alaska Civil Rule 82(b)(3)'s subsection
(I), which allows trial courts to consider "the extent to which a given fee award may be
so onerous to the non-prevailing party that it would deter similarly situated litigants from
66 Borer challenges the fee award because "[Alaska]
the voluntary use of the courts."
Natives are an economically disadvantaged group and a large fee award would seriously
63 Dickson v. State, Dep't of Nat. Res. , 433 P.3d 1075, 1089 (Alaska 2018)
("[A]wards of attorney's fees made pursuant to the schedule set out in Rule 82 are
presumptively correct, and the superior court need not make any findings in support of
the award." (alteration in original) (quoting Greene v. Tinker , 332 P.3d 21, 41 (Alaska
2014))).
64 Id. (quoting Williams v. Fagnani, 228 P.3d 71, 77 (Alaska 2010)).
65 See Alaska R. Prof. Conduct 4.1(a) (prohibiting only "false statement[s] of
material fact or law to a third person").
66 Alaska R. Civ. P. 82(b)(3)(I).
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67
discourage similarly situated litigants" and because "[f]ew, if any individual
shareholders have the means or will to challenge the board." We are not persuaded that
the 20% fee award here, totaling $17,780, was "so onerous" that it would deter similarly
situated litigants from bringing meritorious claims against a corporation.
Third, Borer invokes subsection (H), which allows trial courts to consider
"the relationship between the amount of work performed and the significance of the
68 Borer essentially claims that Eyak's litigation costs were
matters at stake."
disproportionately high given the low stakes for Eyak in this case, indicating that Eyak
prolonged litigation because of "motivation beyond the case at hand." But Borer
downplays what was at stake for Eyak in this case. Had Borer prevailed, Eyak's ability
to protect its interests through the confidentiality agreement and code of conduct for
directors might have been impaired, making its confidences vulnerable. Given those
stakes, we are not persuaded that Eyak inappropriately prolonged litigation to increase
attorney's fees.
Fourth,Borer appearstoinvokefinancialhardshipas an "equitablefactor[]"
under subsection (K).69 Borer's only assertion about his financial hardship is that he
"lack[ed] [the] funds" to hire counsel for his appeal. Borer has not shown that this
hardship was so compelling that the superior court abused its discretion in granting Rule
67 Eyak argues that this argument is waived because "Borer did not raise [this]
argument at the superior court, nor present any supporting evidence that the Rule 82
award was 'so onerous' that it would discourage other plaintiffs from raising claims
against Alaska Native Corporations." This waiver argument is plainly contradicted by
the record, because Borer discusses this precise issue in his opposition to Eyak's motion
for attorney's fees.
68 Alaska R. Civ. P. 82(b)(3)(H).
69 Alaska R. Civ. P. 82(b)(3)(K).
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70
82's default award. Borer could afford to and did hire counsel in the proceedings
below. As the party filing the lawsuit, Borer should have been aware of the burdens of
litigation and its attendant expenses. And Borer's extensive motion practice increased
the amount of time spent on this case by both parties. We decline to find that the
superior court abused its discretion based on Borer's financial hardship.
71 and argues that fees should be
Fifth, Borer again appears to invoke equity
reduced because he "gains no personal benefit regardless of the outcome." But this is
incorrect. Had he prevailed, Borer would have personally benefitted: he would have
gained a seat on the board along with the attendant powers and compensation of a
director, unburdened by the Agreements to which he objects.
Sixth, Borer argues that he should be "indemnified against legal fees"
because had he won, he "would clearly be entitled to indemnification" under
AS 10.06.490(c), which we have noted requires that "a corporation must indemnify a
director who 'has been successful on the merits or otherwise' in defense of certain
72 But Borer was not "successful on the merits or otherwise" in his lawsuit;
lawsuits."
besides, he never raised this argument before the superior court, so it is waived.73
70 See Israel v. Dep't of Corr., 460 P.3d 777, 779, 786 (Alaska 2020)
(declining to find trial court abused its discretion awarding attorney's fees to Department
of Corrections when pro se litigant was incarcerated and had financial hardship).
71 See Alaska R. Civ. P. 82(b)(3)(K) (allowing variation of attorney's fee
award upon consideration of "equitable factors").
72 Holmes v. Wolf, 243 P.3d 584, 590 (Alaska 2010) (emphasis omitted)
(quoting AS 10.06.490(c), which mandates indemnity for directors).
73 McMullen v. Bell, 128 P.3d 186, 190 (Alaska 2006) ("[T]his court will not
consider an issue raised for the first time on appeal.' " (quoting State v. Nw. Constr., Inc.,
741 P.2d 235, 239 (Alaska 1987))).
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BecauseBorer has not presented acompellingreasontoreversethesuperior
court's grant of attorney's fees, we uphold the award.
V. CONCLUSION
We AFFIRM the superior court's judgment and award of attorney's fees
for Eyak.
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