Alaska Interstate Construction, LLC v. Pacific Diversified Investments, Inc.
279 P.3d 1156
Alaska2012Background
- AIC, a general contractor, was managed by PDI through Ellsworth after Ellsworth obtained a 20% stake in 1998 with a management agreement.
- PDI leased two aircraft to AIC and provided related services, with AIC paying over $20 million under the leases.
- In 2005 AIC sued PDI and Ellsworth alleging fraud, breach of the operating agreement, breach of fiduciary duty, UTPA violations, and related claims; the jury awarded $7.3 million on UTPA and $7.3 million on fraud/fiduciary duties, plus other amounts for related claims.
- The superior court granted JNOV overturning the UTPA award on exemption grounds, and later rulings awarded PDI fees and costs; AIC and PDI cross-appealed.
- The Alaska Supreme Court affirmed several rulings (UTPA applicability to intra-corporate disputes, limitations issues, discovery denial, and quasi-estoppel standard) but reversed on material-breach findings and fraud-inducement rulings, ultimately vacating prevailing-party determinations and certain fee awards.
- In light of the rulings, PDI’s indemnity claims became moot; prejudgment interest was vacated and remanded for calculation with detailed findings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| UTPA applicability to intra-corporate disputes and aircraft leases | AIC argues UTPA applies to intra-corporate dealings; exemption fails. | PDI argues exemption under AS 45.50.481(a)(1) applies because the conduct is regulated by FAA FARs. | UTPA applies; exemption not established. |
| Material breach required by fraud and breaching the operating agreement | Fraud and wilful misconduct amount to material breach under Coffel and related law. | Profitability could render breach immaterial; fraud may not automatically be material. | Fraud and wilful misconduct require material breach as a matter of law. |
| Fraud in the inducement as to Ellsworth personally bound by non-compete | Ellsworth fraudulently induced to sign personal non-compete; Briar evidence shows personal binding. | Ellsworth signed as PDI president; contract ambiguous about personal binding. | JNOV should have been granted; Ellsworth not personally bound. |
| Statute of limitations on aircraft-lease claims | Tolling due to delayed discovery extended limitations. | Limitations began earlier; tolling not warranted. | Not barred; tolling based on discovery; remand for precise calculation. |
Key Cases Cited
- Coffel v. Steward, 101 P.3d 1047 (Alaska 2004) (fraud can be a material breach of contract under certain circumstances)
- Sisters of Providence in Wash. v. A.A. Pain Clinic, Inc., 81 P.3d 989 (Alaska 2003) (discusses scope of UTPA and damages issues)
- Johnson v. Curran, 137 P.3d 295 (Alaska 2006) (parol evidence in fraudulent inducement claims; integration concepts)