243 P.3d 584
Alaska2010Background
- Leisnoi, Inc. is an ANCSA Alaska Native Corporation with a five-member board after 2001 restructuring; plaintiffs allege failures to hold annual meetings, issue annual reports, and obtain annual audits; the suit began in 2004–2005 with derivative claims against three current directors; the superior court held three directors could not be required to act for the corporation and dismissed derivative claims; trial findings found breach related to failing to inform about federal audit requirements but not to hold meetings or issue reports; the court ordered the full Board to address the audit issue and declined to award nominal damages or bar indemnification; on appeal, Holmes and Gregoroff challenge security, derivative dismissal, and remedies, and cross-appeals challenge damages and indemnification rulings; the Alaska Supreme Court affirmed all rulings.
- The case centered on whether individual directors could be compelled to perform board duties (meetings, reports, audits) and whether derivative claims against them could be sustained; the court analyzed statutory duties under AS 10.06 and ANCSA requirements, and whether fiduciary breaches warranted damages or nominal relief; it also evaluated the propriety of security for costs and the scope of indemnification for prevailing directors.
- The trial court found the three named directors did not breach duties by failing to hold meetings or issue reports, but did breach by not informing themselves of the federal audit requirement; the supreme court affirmed this finding and ordered consideration of the issue with the full Board; nominal damages were declined; indemnification was not barred because the directors were successful on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Security for costs related to derivative suit | Holmes/Gregoroff argued no security needed | Security appropriate since <5% threshold met | Correct to require security and to dismiss for failure to meet increased security |
| Derivative claims against individual directors | Derivatives should proceed against three directors | Derivative action improperly limited to non-parties | Derivative claims dismissed; claims live only as to entire board or Leisnoi as entity |
| Whether three directors could be ordered to take action | Majority board potential to fashion remedy | Board as a whole bears duties; non-named directors cannot be compelled | No authority to order non-named directors; duties rest with entire board; no partial remedy |
| Nominal damages for fiduciary breach | Nominal damages should be awarded | No per se nominal damages rule applies; damages not proven | No award of nominal damages; discretion to deny upheld |
| Indemnification of directors | Leisnoi should bar indemnification | Indemnification allowed where directors prevailed on merits | Indemnification not barred; directors prevailed on merits; indemnification allowed |
Key Cases Cited
- Brown v. Dick, 107 P.3d 260 (Alaska 2005) (no per se nominal damages rule for fiduciary breach; discretionary ruling)
- Loudon v. Archer-Daniels-Midland Co., 700 A.2d 135 (Del. 1997) (per se damages rule limited to certain transactions)
- In re Tri-Star Pictures, Inc. Litig., 634 A.2d 319 (Del. 1993) (relevance to fiduciary breach and damages context)
- A.J. Indus., Inc. v. Alaska Pub. Serv. Comm'n, 470 P.2d 537 (Alaska 1970) (statutory interpretation guiding board duties)
- Messerli v. Dep't of Natural Res., 768 P.2d 1112 (Alaska 1989) (contextual authority cited in statutory analyses)