OAKLY ENTERPRISES, LLC, and RYAN FRIESEN v. NPI, LLC; NPI TIMBER, LLC; and COREY WHITNEY, individually and d/b/a WHITNEY LOGGING
Supreme Court No. S-15159
THE SUPREME COURT OF THE STATE OF ALASKA
August 28, 2015
Superior Court Nos. 3PA-08-01671 CI and 3PA-08-01349 CI (Consolidated)
No. 7042
MAASSEN, Justice.
Notice: This opinion is subject to correction before publication in the PACIFIC 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.
OPINION
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Palmer, Kari Kristiansen, Judge.
Appearances:
Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and Bolger, Justices.
MAASSEN, Justice.
I. INTRODUCTION
This case arises from a dispute over whether the owner of a wood chipper may be held jointly and severally liable, along with two property owners, for damages caused to their property by the chipper‘s leak of diesel fuel. The chipper‘s owner had leased it to another person, who abandoned it. The property owners claim they were only severally liable, if at all, for a portion of the damages and that the chipper‘s owner was liable for the rest. A jury found that the chipper did not contaminate one of the two properties, but as for the other the jury found its owner jointly and severally liable, along with the chipper‘s owner. The superior court then equitably allocated damages among the liable property owner, the owner of the chipper, and the chipper‘s lessee. This allocation left the property owner liable for most of his own loss.
Both property owners appeal the superior court‘s decision to equitably allocate damages.1 They also appeal an evidentiary ruling
II. FACTS AND PROCEEDINGS
Ryan Friesen and Oakly Enterprises, LLC, own properties across the road from each other in Wasilla. Oakly Enterprises is a family-owned corporation, owned half by Friesen and half by his father and stepmother.
In 2004 a logger named Corey Whitney leased wood chipping equipment from NPI, LLC, a company involved in construction and timber leases. Whitney later entered into a lease with Oakly Enterprises for a shop and a place to store some of the leased equipment. He entered into another lease with Friesen for a heavy equipment parking area, where he parked the piece of equipment at issue here — a 1995 Peterson chipper he had leased from NPI.
In early 2006 the Alaska Department of Environmental Conservation discovered several diesel spills on the Oakly Enterprises property, near the chipper. In June the Department sent notices of violation to Whitney and Oakly Enterprises, asserting that they had violated state regulations2 by failing to contact the Department and submit a site characterization plan before cleaning up surface stains from the diesel spills. Neither Whitney nor Oakly Enterprises was cooperative. In May 2007 Whitney notified Oakly Enterprises that he would vacate its property at the end of June, and in early July he transported some of the leased equipment back to NPI at Port MacKenzie, a commercial and industrial area on Cook Inlet. Whitney left the remainder of the equipment, including the Peterson chipper, in place on Friesen‘s and Oakly Enterprises’ properties.
In July 2007 Friesen hand-delivered a letter to NPI claiming he had become “aware of some pretty large oil spills” on his property and would “start cleanup [him]self to prevent further pollution” if NPI did not respond within five days. Four days later he moved the Peterson chipper to property owned by his father. During the months that followed, NPI removed most of its remaining equipment from the Friesen and Oakly Enterprises properties, but it did not undertake any environmental cleanup. It recovered the Peterson chipper in October 2008.
In 2009 Friesen and Oakly Enterprises brought suit against NPI and Whitney, seeking damages in excess of $150,000 for the contamination of their properties, costs of cleanup, and rent.3 Whitney did not answer the complaint, and a default judgment was entered against him. The superior court initially granted summary judgment to NPI, holding that NPI was not liable for Whitney‘s actions in polluting the Friesen and Oakly Enterprises properties as the “operator” of the involved “facility” (as these terms are defined for purposes of
The superior court conducted an eight-day jury trial on the issue of whether NPI was liable for any of Friesen‘s and Oakly Enterprises’ damages. The jury instructions included one on “avoidable consequences,” proposed by NPI, and a corresponding verdict form asking the jury to affix a dollar amount to the damages Friesen reasonably could have avoided, if any.4 Answering specific questions on the special verdict form, the jury found that NPI was not the “operator of a facility” from which diesel fuel was spilled on Oakly Enterprises’ property but that the diesel spill on Friesen‘s property came from the Peterson chipper. It found that “the reasonable costs of repairing the damage to the Ryan Friesen real property from the diesel spills” was $38,437, and that Friesen reasonably incurred $14,990 in expenses “in an effort to avoid or reduce other losses he reasonably believed were caused by NPI‘s 1995 Peterson Chipper on his land.”5 Finally, the jury answered “Yes” to the question whether Friesen could “reasonably have avoided all or part of the diesel spill on [his] property,” and it found that “the dollar amount of loss to Ryan Friesen due to the diesel spill on [his] property that [he] reasonably could have avoided” was $7,687.40 (20 percent of the total amount it had found to represent the reasonable costs of repair).
NPI filed a post-trial motion asking the court “to equitably allocate damages among the parties through the contribution process found in
The court further concluded that Whitney‘s share of damages was uncollectible and was thus an orphan share.7 It divided the orphan share between Friesen and NPI in proportion to their relative shares of damages, with the result that Friesen was responsible for $35,423.54 of the costs of remediating Friesen‘s property and NPI was responsible for the remaining $3,013.46. The court subsequently applied the same analysis to Friesen‘s expenses in removing the chipper from his property (the $14,990 the jury found to be his removal expenses, reduced on remittitur to $10,787). It found that NPI could have recovered the chipper for considerably less money than Friesen spent moving it but that Friesen and his father “unreasonably and unjustifiably refused to return the chipper to NPI for fifteen months.” Using the same percentages it had used for the costs of repair, the court concluded that Friesen was responsible for $9,941.30 of the removal expenses and NPI was responsible for the remaining $845.70.
The court found that neither NPI nor Friesen was the prevailing party on the claim between them. However, it found that NPI prevailed over Oakly Enterprises, and it awarded NPI attorney‘s fees from Oakly Enterprises in the amount of $36,764.63.
Friesen and Oakly Enterprises appeal the superior court‘s decision to grant NPI‘s motion for contribution. They argue that the jury‘s avoidable consequences finding apportioned the harms caused by the diesel spill under
III. STANDARDS OF REVIEW
The superior court‘s decision to allocate and apply contribution to a damage award involves the interpretation and application of a statute.8 Questions regarding the interpretation and application of a statute are “questions of law to which we apply our independent judgment.”9 We interpret statutes “according to reason, practicality, and common sense, taking into account the plain meaning and purpose of the law as well as the intent of the drafters.”10 “Whether the superior court applied an incorrect legal standard is a question of law that we review using our independent judgment.”11
We set aside factual findings of a lower court “only when they are clearly erroneous.”12 “[F]actual findings are clearly erroneous when, after a review of the record as a whole, we are ‘left with a definite and firm conviction that a mistake has been made.‘”13
“We review the superior court‘s decision to admit or exclude evidence for an abuse of discretion.”14 But “[t]he correct
“We review an award of attorney‘s fees under an abuse of discretion standard.”16 “The trial court has broad discretion in awarding attorney‘s fees; this court will not find an abuse of discretion absent a showing that the award was arbitrary, capricious, manifestly unreasonable, or stemmed from improper motive.”17
IV. DISCUSSION
A. The Superior Court Did Not Err When It Granted NPI‘s Post-Trial Request For Contribution And Equitable Allocation Under AS 46.03.822(j) .
Alaska Statute 46.03.822(a) provides that “the owner and the operator of a... facility, from which there is a release . . . of a hazardous substance,”18 is “strictly liable, jointly and severally, for damages.”19 This is Alaska‘s analog to the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), which imposes strict joint and several liability under similar circumstances.20 Because this case was brought under section .822, our analysis turns first to the plain language of that statute;21 federal law interpreting CERCLA is persuasive but not controlling.22
A person can escape the joint liability imposed by subsection .822(a) through apportionment. Under subsection .822(i), “a person otherwise jointly and severally liable under [subsection .822(a)] is relieved of joint liability and is liable severally for damages and costs... if the person proves that (1) the harm caused by the release . . . is divisible; and (2) there is a reasonable basis for apportionment of costs and damages to that person.”23 “Equitable considerations play no role in the apportionment analysis; rather, apportionment is proper only when the evidence supports the divisibility of the damages jointly caused by the [potentially responsible parties].”24 Persons relieved of joint and several liability by apportionment are liable for only their own divisible shares of costs and damages. The burden of proof is on the party seeking to avoid joint and
“Not all harms are capable of apportionment, however“;26 jointly and severally liable parties who cannot prove the divisibility of harm and a reasonable basis for apportionment remain liable for the entire harm.27 But they may bring claims for contribution against other persons who are also jointly and severally liable for the same harm, either in the same civil action or in a subsequent one.28 Thus, once a party with a direct claim for damages against another has been found jointly and severally liable for a release of hazardous substances, the court may, as it did here, “recast the direct claim as a claim for contribution upon conclusion of the litigation.”29
In contrast with apportionment, which relates to the responsibility of a particular cause for a particular amount of damages, contribution claims essentially seek to allocate damages equitably among those who share responsibility.30 Contribution under subsection .822(j) allows parties who are jointly and severally liable to recover from each other on the basis of equitable factors that the superior court determines are appropriate to the case.31 But a person who has been “relieved of joint liability and is liable severally for damages and costs attributable to that person” under the apportionment analysis of subsection .822(i) cannot be made to contribute to persons who remain jointly and severally liable for all the damages; such a person is no longer an “other person who is liable under (a) of this section” and who can be pursued for contribution under subsection .822(j).
On this appeal, there is no dispute that Friesen and NPI were both strictly liable under section .822(a) for the diesel spill on Friesen‘s property, as owners and operators of the “facility” (broadly defined by statute to include both the equipment and the site32) where the spill occurred. But Friesen argues that the superior court erred when it granted NPI‘s claim for contribution and applied the equitable analysis. He contends that contribution was inappropriate in this case because the jury had already apportioned the damages for which he could be held severally liable under subsection .822(i) when, in response to the verdict‘s questions about avoidable consequences, it identified the amount of damages he reasonably could have avoided. In his view, the jury‘s finding that he reasonably could have avoided some of the damages was a determination that he was not responsible for any of the other damages. We reject this argument for the reasons that follow.
AS 46.03.822(i) .
In its most common configuration, the damages rule of avoidable consequences bars injured parties from recovering damages for any harm they could have avoided “by the use of reasonable effort or expenditure after the commission of the tort.”33 When a fact-finder has concluded that an injured party reasonably could have avoided some of the harm, the injured party‘s damages may be reduced by apportionment.34 But as noted above, a party seeking apportionment under subsection .822(i) must make a threshold showing that the harm is divisible and there is a reasonable basis for apportionment. Here, we conclude that the jury‘s finding of avoidable consequences was not an apportionment under subsection .822(i), as Friesen argues, because neither the parties nor the court intended it to be and because Friesen did not make the threshold showing.
The jury was specifically instructed to determine whether there was any loss Friesen “could have avoided with reasonable efforts and without undue risk, hardship or embarrassment, even though the loss originally resulted from an act or omission for which NPI or Whitney is legally responsible.” In its special verdict form the jury identified $7,687.40 as “the dollar amount of loss to Ryan Friesen due to the diesel spill on the Ryan Friesen property that Ryan Friesen reasonably could have avoided.” The jury made no other findings on the subject of Friesen‘s liability. Its finding that he could have avoided some consequences of the spill did not resolve his liability as an owner for the remainder of the harm the spill caused — liability which, absent the required findings, was joint and several strict liability regardless of fault.
A review of the trial proceedings shows that the parties did not intend the jury to use the “avoidable consequences” instruction to apportion to Friesen a several share of harm. Friesen initially took the position that the jury should not be asked to apportion damages; NPI‘s counsel, on the other hand, suggested that “the court could be helpfully informed by the jury‘s input on apportionment” without feeling bound by it. But the parties’ positions evolved over several days, as their counsel debated whether the jury should have any input into the apportionment of damages and, if not, whether it should be informed of the court‘s role in apportioning damages after trial. Friesen asked that the jury be instructed, “You will be asked to determine the total amount of damages to the property; the court will also decide . . . how much damages to assign to each party.” NPI objected, arguing that such an instruction would confuse the jury, cast doubt on its work, and prompt it to speculate about what the court would do. The court decided not to inform the jury about the possible post-verdict process.
At the end of NPI‘s case Friesen moved for a directed verdict on whether harm could be apportioned, on grounds that NPI had failed to prove the factual prerequisites. The court suggested, as it had before, that the jury be asked to decide the issue, to which Friesen‘s counsel responded that NPI “hasn‘t produced any evidence regarding divisib[ility]. So it‘s not a question that can go to the jury.” The court denied the motion, explaining that it was still unclear whether the issue would be submitted to the jury in a second trial phase or decided post-trial by the court. The court asked for briefing on the issue, but it does not appear the parties submitted any before the close of trial.
Finally, after the jury returned its verdict and the jurors were polled, the court asked the parties whether they “need[ed] the court to do any further inquiry on damages or apportionment or anything; the jury can go?” to which counsel for both parties answered in the affirmative.
In sum, though positions shifted during trial, it is clear that neither party ultimately expected that the jury would decide how damages would be apportioned for purposes of subsection .822(i), notwithstanding the “avoidable consequences” instruction, and neither party asked that the jury make factual findings that could satisfy the prerequisites of that subsection. We conclude, therefore, that the jury‘s finding of avoidable consequences as to some damages was not, and was not intended to be, an apportionment of damages for purposes of subsection .822(i). By deciding that Friesen could have avoided certain damages with reasonable effort, the jury was not deciding that he was not jointly and severally liable for the rest.
2. The superior court properly ordered contribution pursuant to AS 46.03.822(j) .
Following trial, NPI filed a motion for “contribution and equitable allocation” under
The court applied the same contribution analysis to the jury‘s award of $14,990 (reduced on remittitur to $10,787) for “expenses Ryan Friesen reasonably incurred in an effort to avoid or reduce other losses he reasonably believed were caused by NPI‘s 1995 Peterson Chipper on his land” — damages Friesen labels as “mitigation damages.” He argues that “[i]nterpreting
Strict liability under subsection .822(a) was the only cause of action that went to the jury. The parties apparently agreed that among the damages Friesen could ask the jury to award under subsection .822(a) were the mitigation expenses he incurred in moving the chipper from his land. The court so instructed
B. The Superior Court Did Not Abuse Its Discretion By Excluding The Environmental Report Regarding NPI‘s Port MacKenzie Property.
The superior court granted NPI‘s motion to exclude a consultant‘s report on the environmental condition of NPI‘s property at Port MacKenzie, three years after the diesel spill at issue here, concluding that the report was “inadmissible Rule 404 evidence and would result in confusion to the jury.” Alaska Evidence Rule 404 governs the admissibility of “propensity” evidence;39 it provides that “[e]vidence of other . . . acts is not admissible if the sole purpose for offering the evidence is to prove the character of a person in order to show that the person acted in conformity therewith.”40 Propensity evidence may be admitted, however, if it is offered “for a proper purpose, ‘including, but not limited to, proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident.‘”41
Oakly Enterprises argues that the environmental report was admissible under Alaska Evidence Rules 404 and 406 to show that the spill from the Peterson chipper was due to “NPI‘s corporate culture [which] allowed for polluting” and was therefore not the “result of a mistake or an accident.” We reject this argument. The proposed use of the evidence can only reasonably be characterized as to show a propensity — i.e., because NPI was responsible for pollution found at a different location, it must be responsible for the pollution on Friesen‘s and Oakly Enterprises’ property three years earlier.42 The superior court‘s decision to exclude the report under Evidence Rule 404 was not an abuse of discretion.
Nor was the report admissible under Evidence Rule 406, which allows evidence of a person‘s habit or an organization‘s routine practice “to prove that the conduct of the person or organization on a particular occasion was in conformity with the habit or routine practice.” To be admissible, evidence of habit or routine practice must demonstrate, at the very least, a “regular practice of meeting a particular kind of situation
Finally, evidence admissible under other rules must still be excluded under Alaska Evidence Rule 403 if its probative value is outweighed by its unfairly prejudicial effect.46 And Evidence Rule 404(b)(1)‘s presumption that propensity evidence is inadmissible “alters the normal Rule 403 balancing test” so that the party seeking to pass the test “must show that the evidence‘s use for non-propensity purposes will be substantial enough to outweigh the substantial risk of prejudice that such evidence always carries.”47 Evidence of conditions at NPI‘s Port MacKenzie property had little relevance to whether NPI‘s Peterson chipper caused pollution on Oakly Enterprises’ property. The three-year span between the spill and the report made its conclusions even less relevant to the issues being litigated. And the superior court, in excluding the report, further noted that it would confuse the jury, likely because of its remoteness from the events at issue in terms of both time and geography. For all these reasons, we see no abuse of discretion in the superior court‘s exclusion of the report.
C. The Superior Court Did Not Abuse Its Discretion In Its Award of Attorney‘s Fees Against Oakly Enterprises.
For cases that go to trial, prevailing parties who do not recover money judgments are entitled to fee awards that are 30 percent of their “reasonable actual attorney‘s fees which were necessarily incurred.”48 The superior court determined that neither Friesen nor NPI was a prevailing party on the claim between them, but that NPI had prevailed over Oakly Enterprises and was entitled to attorney‘s fees of $36,764.63. The court‘s starting point in calculating the fee award was NPI‘s claimed actual fees of $321,812.50. From this amount it subtracted $76,715, reflecting work done during the contribution phase when Oakly Enterprises was only minimally involved. The court divided the remainder, allocating half to NPI‘s litigation against Friesen and half to its litigation against Oakly Enterprises. Of the half of the total attributable to the litigation against Oakly Enterprises, the court awarded NPI 30 percent of it as required by
Oakly Enterprises contends that NPI‘s fees should have been further reduced because they were disproportionate to both Oakly Enterprises’ fees, which it claims were only $75,000, and the amounts ultimately at issue.
We have held that “[a]n attorney‘s fees decision ‘should not be disturbed unless it is manifestly unreasonable.‘”49 The reasonableness of fees depends on a number
Oakly Enterprises correctly observes that NPI‘s total fees exceeded the amount in controversy. But “[w]e have never stated that spending more on attorney‘s fees than the amount in controversy is per se unreasonable.”54 Friesen and Oakly Enterprises alleged in their complaint that their property damage and cleanup costs would “exceed $150,000,” and the summary judgment motions, jury trial, and extensive post-trial proceedings provide an explanation for why the costs of litigation were hard to contain. Again, the claimed lack of proportionality does not cause us to question the superior court‘s exercise of its discretion.55
V. CONCLUSION
The judgment of the superior court is AFFIRMED.